Blackstone Inc.’s Jonathan Gray expects the US Federal Reserve will raise interest rates to 5.25% to 5.5% and will then hold there an extended period of time, despite emerging signs of slowing inflation.
(Bloomberg) — Blackstone Inc.’s Jonathan Gray expects the US Federal Reserve will raise interest rates to 5.25% to 5.5% and will then hold there an extended period of time, despite emerging signs of slowing inflation.
The Federal Reserve is likely to take rates up to that level “for a while,” the president of the world’s biggest alternative asset manager said at an event in Hong Kong. The market is “too optimistic” over the economy weakening, he said.
While the firm expects an inverted yield curve and slowing economic activity this year, the world is in a “much better spot” than during the 2008 financial crisis, Gray told a Hong Kong audience at a Webinar held by the Hong Kong Academy of Finance on Thursday. “It feels to me more like what we experienced in the early-2000 period where we had technology stocks that had run up too much, we had a Fed-induced slowdown that ended up being shallow and we then came out of it.”
Blackstone has struggled to raise a record-breaking $30 billion buyout fund as last year’s inflation-fueled market swoon rattled institutional investors, whose portfolios were suddenly over-exposed to private equity after stocks and bonds tumbled.
The private equity giant is focusing on driving value by boosting cash flows at its portfolio companies rather than relying on an expansion in multiples. The firm will target areas with a “sectoral tailwind” and companies specializing in digitization in daily life, life sciences, energy transition and travel will be among pocket of opportunities, Gray said.
Emerging markets in Asia such as India and Vietnam offers better growth than some of their peers globally, Gray said, adding that Latin America is less favorable to foreign capital.
Still, operating in these markets contain higher risks as the rule of law and liquidity financing is very hard to come by, he said.
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