“ ‘ I think this could be a lost decade in terms of equity appreciation.’ ”
Blackstone official Tony James, cautioned investors not to expect a lot from the U.S. stock market in the coming decade.
Speaking to CNBC’s “Squawk Box Asia” on Wednesday during a virtual Singapore Summit, the investor with the private equity group told the network that companies will struggle to generate strong earnings in the coming 10-year period, as he predicts that eventually superlow interest rates prevailing now will give way to higher rates in the future that will raise costs for American corporations.
James said higher taxes and stepped-up regulation, which are expected if former Vice President Joe Biden wins the White House in November, will also lead to greater costs and lower profits, which could take the wind out of the stock market.
“All of that will be economic headwinds for companies. So I think you can have disappointing long term earnings growth with multiples coming in a little bit, and I can see anemic equity returns over the next five to 10 years,” he told CNBC.
James credited the Federal Reserve with preventing financial markets from falling off the precipice amid the coronavirus pandemic.
The Blackstone official’s comments come as the U.S. central bank is slated to hold its regularly scheduled policy statement at 2 p.m. Eastern and Chairman Jerome Powell will host a news conference later Wednesday.
Markets, meanwhile, have traded mixed. The Dow Jones Industrial Average DJIA, +0.78% and the S&P 500 index SPX, +0.53% were showing some modest gains, while the technology-laden Nasdaq Composite Index COMP, +0.14% was under pressure.
To be sure, James isn’t the first to predict a lost decade for stocks, back in June, Bridgewater Associates Ray Dalio issued a warning to his hedge fund clients that they could be facing a “lost decade” in terms of returns.