Blackstone COO: "Stocks Could Fall As Much As 20% This Year"

As we discussed just minutes ago, with market volatility surging (and sliding), opinions about what happens next to the market are coming just as fast and furious, and while two noted technicians, Evercore ISI's Rich Ross and Oppenheimer's Ari Wald predicted that the selloff is almost over, more "fundamental" strategists are less sanguine. 

Speaking to CNBC, Blackstone's bilionaire President and COO Tony James said that equity markets could fall as much as 20% this year: "Every historic norm says that stocks are very, very fully valued," James said on Monday, adding that the market decline could be 10% to 20%

Echoing familiar concerns, James said that since the U.S. economy has been picking up for a while, any further stimulus from recent tax cuts may not have been necessary, and in fact could be destructive: "If you’re worried about interest rates and inflation, the stimulus could be the thing that tips us over into a rate spike," James said.

Does this means that James is out of the stock market? In the interview, the Blackstone president said that he is investing his personal money in New York-based Blackstone’s products, and also holds floating-rate bank debt instruments yielding about 6%.

Separately, Guggenheim Partners CIO Scott Minerd also commented on the fate of the rally, saying that in a "Bull markets don’t die from old age. They typically get shot in the head."

Two weeks ago, Minerd prudently warned that Davos might be a flashing contrarian indicator and that investors should consider the positive message from what MarketWatch dubbed the "gilded boondoggle" as a potential reason to sell. In retrospect, he was right.

What's next? Minerds was more sanguine than James, saying that "I’m a bull for the next year or so,” he told Barron’s. "There is another 15% of upside in the stock market from 2017’s close, but after a 300% run [from the 2009 lows], the question is how to time the exit. What are the signs?"

Minerd said he doesn’t think all the pieces are in place for a bear market just yet, though the parabolic nature of stocks right now is a bit unsettling. “Now, individual investors aren’t in the market yet, and that’s why I’m still bullish,” he explains, adding that he’s looking for a flat yield curve in the first quarter of 2019 as the signal to end the bull.

"Historically, once the yield curve goes flat, stock returns for the next 12 months approximate zero. Then, a year later, you get the recession and bear market," Minerd told Barrons.

“On the S&P 500 index, the current level [2819] is roughly where we could be a decade from now. Elevated stock valuations portend weaker returns over the next decade, and retaining some dry powder in the final year of expansion will allow equity and credit investors to take advantage of more attractive valuations,” he said.


Antifaschistische bitzager Mon, 02/05/2018 - 12:01 Permalink

well, unfortunately...even if you have 0% in equity investments, if you live on this planet anywhere outside of some remote self sustaining tribal village somewhere you ARE invested.  -80%...deserved?  probably.  But it will take out everyone...even your Taco Tico Truck and your wife's nail salon.  People that have no clue they are also riding the counterfeiting tsunami wave.  So, be careful thinking you're ready for such an event.  It would be very ugly.

In reply to by bitzager

Tippoo Sultan FreeShitter Mon, 02/05/2018 - 12:02 Permalink

The most interesting portion of this CNBC interview was when this creature outlined his "plan" for ( essentially forced ) retirement savings. Even the CNBC crew was somewhat taken aback by its foundation of onerous government mandates - and what it would do to the 401(k) program.

Tyler, you cut the segment just when it was getting good - and O'Leary was heating up

In reply to by FreeShitter

Number 9 Mon, 02/05/2018 - 11:28 Permalink

might go up 25 % .. could have been maybe at that time we know that we can assure you that the situation in which we speak has many variables that when taken into perspective reveals a revelation that agendas and abilities of players across the spectrum can take advantage of movements inside the realm of the basic fundamentals of the markets.

but this in no way can be taken as investment advice..

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Consuelo Mon, 02/05/2018 - 11:35 Permalink

"adding that he’s looking for a flat yield curve in the first quarter of 2019 as the signal to end the bull."


I'm looking for a hot trade war with China and a Mexican standoff in Syria with the Russians, but that's my typical dour (but quite possibly realistic) outlook.

MK ULTRA Alpha Mon, 02/05/2018 - 11:37 Permalink

What is the probability of an infrastructure build? Trump asks for $1.5 trillion, gets approval for a $1 trillion national infrastructure build, uses the strategy of states and private matching investments, federal government share is $500 billion over five years.

The massive infrastructure build is a massive jobs build. This will increase the stagnant velocity of money, GDP growth of 4% to 5% would be the norm. 

The equity markets are a forward looking prediction of US economic growth. The markets are signaling a robust booming economic era.


Edit - many hateful posts from the have nots reacting to my posts on positive economic predictions, the infrastructure build is on top, like icing on the cake of the tax reform act. It takes 18 months for real economic results to be seen in the US economy. Already we're seeing signs with economic records being broken.

The tax reform and the infrastructure build will do what?

Snaffew MK ULTRA Alpha Mon, 02/05/2018 - 11:56 Permalink

for every $1 of GDP creation, there needs to be $5 of debt creation....I'm no Princeton mathematician, but that sure doesn't sound like a robust economic era to me.  It sounds more like a debt driven bubble created to fleece the morons into thinking the economy is strong thus trying to "stimulate" the economy out of the doldrums by using a self reinforcing financial magic show.  It appears that the tricks are starting to be revealed for what they truly are---Illusions!

In reply to by MK ULTRA Alpha

Snaffew MK ULTRA Alpha Mon, 02/05/2018 - 12:47 Permalink

I'll tell you right now...the tax reform act did nothing but create a massive hole in the debt budget.  The stimulus it is supposed to create will never make up for the lack of funding it created that was used to help service the massive debt load.  A rising interest rate environment with record debt and trump pulls off a big tax cut.  I've never seen anything quite so stupid in my whole life and I am 50 years old.

In reply to by MK ULTRA Alpha

verumcuibono Snaffew Tue, 02/06/2018 - 13:34 Permalink

In order to truly understand the debt economy (2.0) and understand why it's on its way out and we'll be seeing the new economy (3.0), you must follow Catherine Austin Fitts. Check out her treasure of vids on TY and then subscribe to her newsletter--she's the originator of the "where's the $50T?" and helped promote Skidmore's research:……

Before CAF was Managing Director with Dillon Read on Wall Street, she was HUD Sec'y under Bush 41 and had created a useful funds-find-the-need tool for HUD financing throughout the various geo sectors in the country. And then the CIA crashed down on her life. She didn't know it at the time but she had just invented a program that tracked the flow of HUD funds and the emergence of CIA crack in communities throughout the country. Took her millions to defend herself. She provides a rare inside look into how the government really functions. 

For example, it would surprise many to know that the intermediary mechanism between HUD and the components it pays out to---is Lockheed Martin.

In reply to by Snaffew

Autumn Cote Snaffew Mon, 02/05/2018 - 14:01 Permalink

Would it be OK if I converted this comment into a stand-alone article for publication on my website?

There is no fee, I’m simply trying to add more content diversity for Writer Beat and I liked what you wrote. I’ll bed sure to give you complete credit as the author. You can learn more about the site by checking out my profile (my email and the website address are there...intentionally vague to avoid spam guard) or just reply "sure (via email)" and I'll handle the rest.

In reply to by Snaffew

Honest Sam Mon, 02/05/2018 - 11:49 Permalink

They could, sure.  Or they couldn't.  Or maybe they will fall or rise 25%, or 33%.

These predictions are the epitome of the much abused term, "NothingBurger".  Worth about as much 1/1000th of a bitcoin.