‘I think this may be a lost decade in terms of stock appreciation.’
Blackstone’s official Tony James warned investors not to expect much from the US 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 will be super low interest rates prevailing now will give way to higher rates in the future that will increase costs for US companies.
James said higher taxes and intensified regulation, which is expected if former Vice President Joe Biden wins the White House in November, will also lead to higher costs and lower profits, which could take the wind out of the stock market.
“All this will be a financial headwind for the companies. So I think you can have a disappointing long-term earnings growth with multiples coming in a bit and I can see anemic return on capital over the next five to ten years, ”he told CNBC.
James credited the Federal Reserve for preventing financial markets from falling from the bottom in the midst of the coronavirus pandemic.
Blackstone’s official comments come as the US Federal Reserve is due to hold its regularly scheduled political statement at. 14.00 East, and President Jerome Powell will host a press conference later Wednesday.
The markets, meanwhile, have traded mixed. Dow Jones Industrial Average DJIA,
and S&P 500 index SPX,
showed some modest gains, while the technology-based Nasdaq Composite Index COMP,
was under pressure.
To be sure, James is not the first to predict a lost decade for equities, back in June, Bridgewater Associates Ray Dalio issued a warning to its hedge fund customers that they could face a “lost decade” in terms of returns.