Market Commentary

by Byron Wien

Blackstone is pleased to offer the following Market Commentary by Byron Wien to share his thinking on global economic developments, market insights and other factors that may influence investment opportunities and strategies.


Byron Wien is a Vice Chairman

  • Oct 07, 2015

    Better Times are Ahead

    While most Americans, Europeans and many people in finance were enjoying their annual break from the intensity of their jobs, the world seemed to change in the middle of August.
  • Sep 08, 2015

    Unfazed by the Turmoil

    For the past several decades I have organized a series of lunches on summer Fridays for serious investors who spend their weekends in eastern Long Island. There are hedge fund activists, long/short heroes, corporate chiefs, venture capitalists, private equity stars and others. Many are well-known and there are more than a few billionaires. The goal is not to see how much net worth I can cram onto a shaded terrace, but how much wisdom I can focus on the key investment issues facing all of us. As Howard Marks of Oaktree wrote last year, the danger of this type of gathering is that a consensus of peers has a tendency to be wrong. I think it's fair to say that last year nobody anticipated the sharp drop in the price of oil, the Greek crisis or the Chinese devaluation, but over the years there have been a number of impressive insights.
  • Jul 28, 2015

    Dark Clouds Clearing

    At the beginning of the year I had a rosy view of how 2015 would play out:
  • Jun 30, 2015

    The Smartest Man is Wild about Innovation

    For the past fifteen years I have written annually about a person I have come to call “The Smartest Man in Europe.” For new readers, he is a finance person in his 80’s who has built his reputation by identifying important trend changes early and putting serious money behind his conclusions. Descended from a mercantile family that operated canteens selling food and weather protection along the Silk Route, he was educated in Europe, trained in New York and returned home to take advantage of the wealth-creating opportunities resulting from the post-war recovery. Listening to conversations around the dinner table, he was encouraged to focus on the major events early, and his success is a product of this skill. That success is reflected in his homes and other comforts he enjoys. His art collection spans centuries, from Canaletto to Koons, but what keeps him vibrant is ideas.
  • Apr 28, 2015

    Population and Productivity

    We were all lucky to be born at the right time. Over the past fifty years, world GDP growth has been averaging 3.6%, driven by employment increases and productivity improvements in roughly equal proportions. An exhaustive and important study by the McKinsey Global Institute concludes that over the next 50 years population growth will decline to .3% annually. If productivity continues to contribute 1.8%, overall growth will decline to 2.1%, a rate 40% less than during the past half-century. The implications of this slowdown on global changes in the standard of living and investment opportunities could be enormous.
  • Mar 30, 2015

    Exploring Four Myths

    In talking with investors, I find four concepts prevail among the consensus that I believe may be wrong. In the interest of full disclosure, it is fair to say that at various points in time I have subscribed to each of these ideas. They are:
  • Mar 02, 2015

    Focusing on the Three D’s

    Looking forward several years, there will be three important factors that will determine the economic and investment outlook. They are decoupling, deflation and demand. The decoupling concept is based on the question, “Can the United States economy expand at about 3% if the rest of the world is in recession or experiencing diminished growth?” The deflation concept is supported by the decline in the price of oil and other commodities, plus the willingness or necessity of the unemployed throughout the world to take a job at almost any level of compensation. Less discussed, but possibly most important, is whether sufficient demand for goods and services exists throughout the world to produce at least modest growth and enough jobs in the major industrialized countries. Right now, various estimates for world real GDP growth this year are just under 3%, but deflation could bring nominal growth lower.
  • Jan 08, 2015

    The Surprises of 2015

    Last year, my results were on the favorable side of average for The Ten Surprises. I got six of the Surprises mostly right, but I basically missed two of the more important Surprises – the year-end drop in oil and the decline in interest rates. At the beginning of the year, almost every observer (including myself) expected the price of oil to rise as a result of increasing demand from the emerging markets. The United States was consuming 21 barrels per person per year while India was using less than two and China less than three. The expanding middle class in these countries would be acquiring motorized vehicles and using more gasoline. Even with hydraulic fracking, few expected production to increase enough to meet the demand, and so the price of oil was expected to rise. On interest rates, the U.S. economy was likely to gather momentum through the year and everyone knew the Federal Reserve was anxious to move away from its low rate policy. As a result, short-term rates would be increased and longer-term rates would rise in sympathy. Or so the consensus held.
  • Dec 05, 2014

    A Lot to Cheer About, and a Look at Israel

    As we enter the final month of the year most of us can look back on 2014 and say it has worked out better than we had expected in January. Back then we were worried about the sluggish economy, the narrowness of a market relying mostly on the performance of technology and biotechnology, the various pockets of political instability and conflict around the world and the ineffectiveness of our political process. In spite of all that investors were optimistic and the Standard & Poor’s 500 made grudging gains through the summer. That came to a temporary end in September and October when the index retreated back almost to its January starting point, but here we are with Christmas approaching and the year-to-date gain is 14%.
  • Nov 03, 2014

    The Long-Awaited Correction and a Report from the Middle East

    All through the summer the United States equity market made new highs in spite of increasing turbulence around the world. The economy was continuing to grow modestly, earnings were coming through and the geopolitical problems were a long way away. The Ned Davis Crowd Sentiment Poll, which includes transactional data like the put-call ratio, showed that investor mood was very optimistic. Historically, the market is vulnerable to a correction when optimism is extreme. You don’t know what will cause the sell-off, but you have the uneasy feeling it’s coming. The market had gone through two years without so much as much as a 10% correction and we were due for one.
  • Oct 02, 2014

    So Much to Worry About

    The Standard & Poor’s 500 finally broke above 2000, but has now fallen (hopefully temporarily) somewhat below that level. Alibaba has had a successful initial public offering, with the stock closing 38% above its offering price on its first day of trading. Animal spirits still prevail, but there is concern that the biggest initial public offering ever may have sapped capital from the rest of the market. Federal Reserve Chair Janet Yellen has indicated that monetary policy will remain accommodative “for a considerable time” even though the bond-buying program of the last several years ends this month, and this suggests that the first increase in short-term rates will be later rather than sooner. The United States economy grew more than 4% in the second quarter after a dismal first and it now looks like second half real growth may trend toward 3%. Scotland voted to remain a part of the United Kingdom. Investors’ outlook reflects these favorable conditions; most surveys reveal an optimistic view.
  • Sep 02, 2014

    A Positive Outlook Amidst Geopolitical Turbulence

    Every summer for the past several decades I have organized a series of lunches for serious investors who spend their weekends on Eastern Long Island where the temperatures are cooler, the scenery is exceptional and ordinarily intense people are more relaxed. This year about 90 attended the four lunches on successive August Fridays. Many of the participants are well known and a number are billionaires. There are hedge fund managers, corporate leaders, activists, buyout specialists, real estate titans, private equity folk and venture capitalists, providing some diversity in terms of their daily activity. I am adding newcomers to lower the average age. The group was correctly positive during the past two summer sessions, so I was curious to see if their mood had changed with so much unrest around the world.
  • Jul 28, 2014

    Challenges to the Positive Outlook

    Since the beginning of the year, I have believed that the second half of 2014 would be positive for both the economies and the equity markets of the developed world. Like many, I was surprised by the weak first quarter in the United States – real Gross Domestic Product (GDP) was -2.9% – but I viewed that as a kind of mini-recession within an ongoing recovery and attributed it to severe weather conditions, accounting issues related to the Affordable Care Act and other factors. I expected that the following quarters would exhibit renewed momentum based on the economic data being reported.
  • Jul 02, 2014

    The Smartest Man in Europe Sees a New Industrial Revolution

    People often ask me if I have a mentor, someone who has influenced my thinking over my career. I have had many, but over the past thirty years I have learned a great deal about investing from the person I have come to refer to as The Smartest Man in Europe. The most important lessons he taught me were (1) that the primary force behind good performance is recognizing important changes before or just as they are starting to happen, and (2) when something significant is happening, put a lot of money behind it. Concentrate on the big ideas; don’t over-diversify.
  • May 30, 2014

    Better Times for the Economy Are Finally Here

    The worst winter in the United States since 1995–96 has finally ended and the economy is responding favorably. I never gave up hope. I believed the housing recovery and energy production were enduring positives, but even those areas were experiencing setbacks. Early favorable signs were the sharp increase in bank loans (up at an annual rate of almost 10%), which indicated improved business confidence, and a pick-up in rail car loadings, which reflected strong order books across a broad range of sectors. First quarter real growth was down 1%, however, showing the economy was at stall speed, but the late Easter may have contributed to that. Those cautious on the outlook point out that the harsh weather could only explain one percent or less of the overall Gross National Product shortfall, suggesting that the quarter was fundamentally weak without considering the weather factor. I still believe momentum will build as we move through the rest of the year, and as a result we should see better economic growth and earnings.
  • May 01, 2014

    Don’t Give Up on Emerging Markets

    At the beginning of the year, there were three potential areas of asset allocation that very few global portfolio managers wanted to consider seriously. As I traveled around the United States and elsewhere in the world, almost none of our clients wanted to hear about Japan, commodities or emerging markets. So far they have been wrong about commodities, which are a part of my radical asset allocation and have broken out of their trading range and headed higher. The standard of living continues to improve in the developing world, and one of the first things consumers do when their income increases is start to eat better. This means more meat and poultry where grains are used for feed as well as more consumption of grains by individuals. As a result of continuing growth in the developing world and flat to uneven agricultural production because of variable weather, prices for corn, wheat and soybeans have risen.
  • Apr 02, 2014

    The Inequality Issue

    President Obama has said that rising income inequality and a lack of economic mobility is “the defining challenge of our time.” He is advocating raising the minimum wage, extending unemployment benefits and making sure workers get paid for overtime. Those measures may provide some relief, but in my view they do not come close to dealing with the fundamental problem. Enhancing the Earned Income Tax Credit may be a better approach.
  • Feb 28, 2014

    Getting to Tomorrow

    We started off the year with a scare from the emerging markets. The Argentine peso was devalued by more than 20%, but other currencies in the developing world had declined sharply as well. Equities in these countries fell also, with many markets down 10% or more. In the developed world equities declined about 5%, but in Japan fell twice that. At the beginning of the year I feared a sell-off and when people asked me why, I fumbled for a credible answer. My thinking was that sentiment was much too optimistic. Everyone had made money in the stock market in 2013, although few had done as well as the Standard & Poor’s 500. People were generally positive about the outlook for 2014 and there was a background of complacency. When these conditions prevail, something always comes along to shake confidence. It is just hard to see what it is going to be in advance.
  • Jan 07, 2014

    The Surprises of 2014

    The purpose of The Ten Surprises is to stretch the thinking of investment professionals so they consider events beyond the prevailing perceptions that could have an impact on the financial markets in the year ahead. My definition of a surprise is an investment-influencing event that most money managers would only assign a one-out-of-three chance of happening but which I believe is “probable,” meaning the event has a better than 50% chance. Not all of the Surprises are contrarian. Some are in the direction of the consensus but more extreme.
  • Dec 06, 2013

    Reflections at Year-End

    I think most investors would agree that as the year began they did not expect the Standard & Poor’s 500 to have risen 27% by Thanksgiving. Stocks have continually worked their way higher with the only meaningful corrections occurring in June, August and October when the talk of reducing the $85 billion a month monetary easing program picked up (June, August) and the government shut down (October). All of this has taken place without the help of especially strong earnings or declining interest rates. The U.S. economy has struggled to grow at 2% and the much-anticipated year-end acceleration has failed to materialize. The individual investor has become less enchanted with bonds and has been buying stocks, but it has not yet become a tumultuous shift. Corporations have been purchasing their own stock back, but nothing much beyond normal levels. Washington continues to be dysfunctional so nothing has happened there to increase confidence. Geopolitical issues have improved, but we are not yet at a point where we can feel comfortable about the Middle East, Europe or the South China Sea.