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 02, 2016

    Adjusting to Disruptive Change

    Two conclusions emerged from the Benchmark Lunches this year. The first was that the world was condemned to a prolonged period of slow growth unless vigorous fiscal spending took place in the major industrialized economies.
  • Aug 02, 2016

    Uncertainty Escalates

    We are living in truly turbulent times. Police officers are being shot in the United States. A man drove a truck through a crowd and killed innocent children and others in the south of France. An attempted coup in Turkey has been followed by violent retaliation by the challenged leadership. The United Kingdom voted to sever its relationship with the European Union. A gunman went on a shooting rampage in Orlando. The two candidates running for the U.S. presidency have recorded the highest disapproval ratings in history. Earnings so far this year have been disappointing, yet the Standard & Poor’s 500 is at an all-time high. How do these macro and micro pieces fit together?
  • Jul 05, 2016

    Populism Clouds Europe’s Future

    These are confusing times in both the United States and Europe. The forthcoming U.S. presidential election has two unpopular (according to the polls) candidates running against each other.
  • Jun 10, 2016

    Mentorship and The Smartest Man

    There will be no essay on The Smartest Man in Europe this year. My good friend and mentor Edgar de Picciotto, Chairman of Union Bancaire Privée in Geneva, has passed away; he was 86. I met him during the 1980s when I was at Morgan Stanley and he was a regular attendee at our global client conference at Lyford Cay in the Bahamas. I came to know him well when we were both Supervisory Directors of Soros Fund Management and met for several days twice a year in Europe (Soros was an offshore fund.) When I started writing about him in 2002, I chose not to reveal his name to protect his privacy. I did, however, have a shirt made with the legend “Smartest Man in Europe” and gave it to him, but he told me he only wore it around his swimming pool.
  • May 05, 2016

    China’s Slowing; So What?

    By this time there is not a business person in the western world who doesn’t know that the Chinese economy is not moving ahead at the torrid pace of five years ago.
  • Apr 01, 2016

    Wrestling with Negative Interest Rates

    I have long thought that negative interest rates didn’t make sense, but monetarists argue that they are just low interest rates carried further. The theory is that if consumers and corporations have to pay a price to store their cash at banks, they will go out and spend and invest, but it is not clear that is what happens when deposit rates fall below zero. What is clear is that the outcomes vary by the size and importance of the central bank involved. In any case, the effects seem to be more temporary than long-lasting. Perhaps more worthy of examination are the reasons behind the negative rates and what these conditions mean for the long-term economic performance of countries and regions and returns in their financial markets.
  • Feb 29, 2016

    Analyzing Despair; Restoring Hope

    While I began this year with a cautious view of the financial markets, I did not expect the swift market declines that we have all experienced. At one point, the Standard & Poor’s 500 was down 10% year-to-date.
  • Jan 26, 2016

    Buckle Up

    My list of Ten Surprises for 2016 has a gloomy tone. I generally think of myself as an optimist, but some concepts that I have been brooding about for a while seem to be converging. I have been worrying about the impact of China’s slowdown on the rest of the world, the ramifications of the refugee crisis on the stability of Europe, the peaking of profit margins in the United States, the surfeit of goods around the world coupled with insufficient demand, the dependence of developed economies on central bank monetary easing for growth, the accumulation of public and private debt, income inequality and terrorism.
  • Jan 07, 2016

    The Ten Surprises of 2016

    Here we are with the 31st edition of The Ten Surprises. As loyal readers know by now, my definition of a Surprise is an event I believe is probable, with a better than 50% chance of happening during the year, but which the average professional investor would only assign a one-in-three likelihood of taking place. Over the years I generally have five or six of the Surprises pretty much on target (they have multiple components), but I don’t develop the list to get a high score. My objective is to present concepts that I believe could have an impact on the financial markets but are generally unanticipated by most investors. I would describe my 2015 edition as below average after a good year in 2014. I had a number of Surprises partially “right,” but I missed several important events, including the terrorist attacks in Paris and California, the delay in the increase in short-term interest rates by the Federal Reserve and the weak performance of the U.S. equity markets.
  • Nov 30, 2015

    Exploring the Mysteries of Productivity

    The attacks in Paris on November 13 could have a significant effect on the world economy going forward. Geopolitical factors played a role in the Federal Reserve’s decision not to raise short-term interest rates in September. Similarly, the fear of further terrorism, resultant retaliation and the possible negative impact on economic activity may hold the Fed back in December. There is also the concern that both businesses and consumers will reduce their spending until they become more confident about future world stability. Finally, with ISIS striking targets beyond the Middle East, there is the clear option that a major coordinated military effort might be organized to subdue its forces in the Middle East. This could involve troops on the ground from a number of nations, including the United States, although to date President Obama has ruled that out.
  • Nov 03, 2015

    Uncertainties Holding the Market Hostage

    Before August 11, the popular perception was that the United States economy was growing at about a 2% annual rate and the Standard & Poor’s was locked in a trading range between 2040 and 2125. After the Chinese revalued the renminbi by 2%, the trading range was lowered to 1875–2025. Perhaps the key reason for the equity market’s inability to work its way higher is the belief that earnings for the index are likely to be flat in 2015 compared with last year (the view that we are in an earnings recession). The strong dollar and lower oil prices have contributed to this situation.
  • 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%.