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

  • Sep 05, 2013

    Blackstone Webcast Featuring Byron Wien: Oct 3rd at 11:00 am ET

    Blackstone Webcast Featuring Byron Wien: Can Macro Problems Scuttle The World Recovery? – Oct 3rd at 11:00 am ET
  • Aug 01, 2013

    Worried About the Second Half

    At the beginning of the year most economic observers had a realistic view of the pace of economic growth for the United States. As usual there were positive and negative cross-currents, but the consensus was that real growth would be about 2% for 2013. The Federal Reserve was engaged in a vigorous program of monetary easing, however, and a substantial amount (perhaps three-quarters of the total) of that money flowed into financial assets, driving the price of equities higher and keeping interest rates low. As a result of the strong stock market performance, some economists increased their growth estimates for the second half and the full year. Now, with two quarters behind us, it is time to take a hard look at how the year is playing out.
  • Jul 11, 2013

    Asia Is Reaching a Turning Point

    I spent almost two weeks in Asia in June and in some ways it was an eye-opener. In past years there was a sense of optimism everywhere you went. Now you get a feeling of uncertainty touched by apprehension. My trip covered a great circle starting in Singapore and going on to Kuala Lumpur, Taipei, Hong Kong, Beijing, Seoul and Tokyo. Spending only one day in each city, my observations were more impressionistic than analytical. I talked with sovereign wealth fund managers and other major investors. Most concerns related to China’s outlook and whether the financial system there was overextended. As we all know, China is the engine of growth for the region and any problems there are felt everywhere else. In contrast to last year, Japan was also a major topic of interest.
  • Mar 05, 2013

    Money Is Everything

    It is hard to believe but as recently as 2009 the entire balance sheet of the Federal Reserve was less than $1 trillion. Today it is just under $3 trillion, and the Fed is buying $85 billion of Treasury and mortgage-backed securities a month, so if it maintains purchases at that rate, the Fed balance sheet will grow by more than $1 trillion in 2013 alone. The Wilshire 5000 index, the broadest measure of U.S. stock market performance, has risen from 8,000 in 2009 to almost 16,000 today, proving once again there is a high correlation between monetary policy and stock market performance. The Fed hopes that the money it pours into the economy through bond purchases will stimulate growth and create jobs. That doesn’t seem to be the way the world works, however. A significant portion of the money would appear to flow into financial assets. You could argue, though, that the Fed’s objective is at least partially being fulfilled because the Fed balance sheet has tripled while the stock market has only doubled in the last four years, but all this monetary expansion has not gotten the United States on a strong growth path.
  • Feb 04, 2013

    Serious Hurdles Ahead

    The Ten Surprises of 2013 got off to a rocky start in the first half of January. The United States equity markets surged in the first week after Congress was able to pass legislation avoiding an increase in taxes on more than 90% of employed Americans. When you take a hard look at the deal, it was very disappointing. The original proposals by both President Obama and House of Representatives Speaker Boehner asked for $2.4 trillion in different proportions of revenue increases and spending cuts over ten years. The final deal amounted to $600 billion, mostly from raising taxes on high income earners; spending cuts were minimal. What’s more, the 2% payroll tax holiday expired; I had thought it would be phased out gradually. This will reduce paychecks for all those employed and is bound to have an impact on consumers. In my view the Republicans were out-traded. They were fearful that they would be blamed by everyone if all the Bush cuts expired, so they agreed to a deal that was far from the one they originally offered.
  • Nov 02, 2012

    Four Major Problems

    The pace of the United States economy is improving from the disappointing performance of the first three quarters. Initial jobless claims have declined and both the manufacturing and the service sector purchasing manager indexes are above 50, indicating the economy is expanding. Automobile production is strong, housing is bottoming, and retailers are gearing up for a robust Christmas season. In Europe every effort is being made to hold the European Union together and keep the euro as the continent’s basic currency. Central banks in Europe and the United States are expanding money supply vigorously, but in spite of that, inflation is tame in the developed world and interest rates are low in the U.S., the U.K. and Germany. China is applying both fiscal and monetary stimulus to ensure a “soft landing.” In spite of the recent correction, the equity market in the United States is up in double digits, so why should I be worried?
  • Oct 22, 2012

    Webcast: Is the 2012 Market Ahead of 2013 Reality? With Byron Wien

    Listen to webcast, Thursday, October 25th
  • Sep 06, 2012

    A Constructive View as Summer Ends

    For several decades I have organized a series of “Benchmark” lunches on Fridays in August for serious investors who spend their summer weekends in eastern Long Island. About 75 attended the three sessions, including leaders in hedge funds, private equity, real estate and venture capital. There were many billionaires and many others whose net worth hasn’t quite gotten there, but whose views are widely respected throughout the investment community. For the past two years the mood has been decidedly downbeat, but, looking back on it, I have to wonder how much the performance of the equity market during the weeks leading up to the lunches had something to do with how the participants viewed the outlook. If you recall, the slogan “Sell in May and go away” worked pretty well in 2010 and 2011. This year, however, the United States market hit its recent low on June 1 and stocks traded higher during July and August.
  • Jul 12, 2012

    Webcast: Optimistic About the Outlook: Contrarian or Delusional? With Byron Wien

    Listen to webcast
  • Jul 02, 2012

    The Smartest Man is a Firedancer

    When the New Democracy party in Greece defeated the anti-bailout Syriza, I was anxious to learn what The Smartest Man in Europe thought of it all. The next day I flew across the Atlantic to meet him and we had a long discussion about the world financial outlook. Many of you remember The Smartest Man from earlier essays; I have been writing about him annually for more than a decade. He has been a friend for thirty years, and during that period he has shown an almost uncanny ability to see major events affecting the financial markets before other observers. Among these were the fall of Japan as an economic power in the 1980s, the economic changes in China and their significance the early 1990s, and the serious consequences of excessive borrowing in the developed world in the last decade.
  • Jun 05, 2012

    Into the Weeds of the European Debt Crisis

    I have just spent two weeks talking to our clients in Asia. Starting in Tokyo, I traveled to Seoul, Beijing, Hong Kong, Taipei, Singapore and Sydney. My objective was to better understand what was happening in the economies in the region, but I found that everyone wanted to talk about whether the European Union and the euro would survive. The Chinese were worried because Europe was an important market for them and everyone else was worried because their major exports were to China and if China slowed down seriously, they were in trouble.
  • Apr 03, 2012

    The Disbelievers

    One of my Ten Surprises was that the Standard & Poor’s 500 would reach 1400 sometime during 2012, and here we are at the beginning of the second quarter and it’s already there. When I wrote that, my objective was to have the most optimistic estimate among Wall Street strategists. I actually thought the S&P 500 could reach 1500 based on the generally achieved (but not last year) multiple of 15 times and operating earnings of $100. Estimates have been trimmed somewhat, but, at this point, I still think 1500 is likely. The real question is, “Why are investors so skeptical?”
  • Mar 05, 2012

    Where We Went Wrong

    Ever wonder how we got into this predicament? Academics and strategists have been analyzing our current financial situation endlessly, but I haven’t seen too much probing into the origins of our present problems. In my opinion, you probably have to go back to the end of World War II to understand how we got here. I think policy makers in the United States especially failed to recognize the significance of four important events that led to our current challenging set of circumstances.
  • Feb 03, 2012

    An Optimistic Outlook

    There is a nervous and gloomy mood out there. The Ten Surprises of 2012 have a positive tone, and for the past month I have been discussing them with our clients and others in large and small groups. Most investors believe the United States economy will grow at only 1% to 2% and the European sovereign debt crisis will remain unresolved, with Greece and possibly others being forced to withdraw from the Union. No progress will be made by Congress in reducing the budget deficit until after the November election. Emerging market economies around the world will slow, and we will have another difficult year for global equity market performance.
  • Jan 04, 2012

    The Surprises of 2012

    All this began to change in October. Data for the U.S. economy began to improve and the equity market moved back to where it had started the year. European leaders, recognizing the urgent need for a solution to the sovereign debt crisis, began to talk of a treaty change that would move the continent towards a fiscal union. By year-end the 2011 Surprises looked much better. A blogger, analyzing each of them and giving me partial credit for a few, came up with a score of 50%, which is consistent with my long-term average. Other reviewers were not so generous. My definition of a surprise is a market-influencing event that the average investor would assign only a one-out-of-three chance of taking place during the year, but that I believe is “probable,” i.e., that the event has a better than 50% chance of happening. Here is my review.
  • Dec 07, 2011

    Denial No Longer

    On both sides of the Atlantic, we have finally come to the point where if we continue on our present respective paths the outcome is not likely to be pleasant. In the United States the wake-up call was the failure of the Congressional Super Committee to come up with a credible plan to reduce the U.S. budget deficit by $1.2 trillion over ten years. In Europe it was the rise in the cost of raising government funds in Italy and Spain, culminating in November with the lack of bids for part of an auction of German debt and a sudden rise in interest rates there. Finally it appeared that doing nothing and muddling through were incompatible. The verdict was delivered in both the European and American stock markets by a resumption of the free fall in equity prices that we experienced in August and September.
  • Nov 07, 2011

    Revisiting Radical Asset Allocation

    In December of last year I suggested a “Radical” Asset Allocation program for institutional investors. I created it in reaction to the hours I had spent as a member of several investment committees where I had listened to and participated in discussions of the global investment environment, but which, in the end, only made very small changes in the asset allocation no matter how profound were their conclusions about the outlook. My investment philosophy is that making many small changes will produce disappointing results. It is the big ideas that make a difference and you should spend your time developing them.
  • Oct 03, 2011

    It’s Hard to Be an Optimist

    I still believed we could avoid a recession and a bear market, but I began to realize that there were some structural and secular problems that were holding the economy back. I had long thought the United States, Europe and Japan were mature economies that would have trouble growing much faster than 3% for any sustained period. I was now beginning to see that there are some impediments that might keep growth from even approaching that level.
  • Sep 02, 2011

    End of Summer Despair

    The mood of this year’s sessions was even more negative than in 2010. There was a clear lack of confidence in President Obama and his advisors, a belief that it was unlikely that Congress would be able to compromise sufficiently on deficit reduction and revenue increases to put the federal budget on a sound footing and initiate programs to create jobs, improve infrastructure and deal with the challenges of education, healthcare and competitiveness. The investors were also concerned that the sovereign debt problems of Europe, now that they have spread to Italy and Spain, would overwhelm the resources of the European Central Bank, the International Monetary Fund and Germany. While believing growth would continue to be relatively strong in Brazil, India and China many worried that tight monetary policies would slow even these emerging economies. Finally there was concern that the Arab Spring might suffer a second wave of unrest if a failure of the new regimes to provide jobs were to result in widespread disappointment.
  • Aug 02, 2011

    Looking Beyond the Twin Crises

    In spite of this, the financial markets began the third quarter by moving higher. The fundamental backdrop was hardly favorable. The employment report for June showed that the economy produced far fewer jobs than expected; auto production, which was expected to surge, only improved modestly; and consumer confidence declined sharply. For several months I have been making the case that the second half of the year would be stronger for the U.S. economy than the first, but the skepticism I have encountered has intensified.