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

  • 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.