The global economy has been under pressure, with concerns spanning from geopolitical tensions to interest rates.
As the World Economic Forum continues in Davos, Switzerland, Blackstone Group (BX) Co-Founder, Chairman, and CEO Stephen Schwarzman joins Yahoo Finance's Brian Sozzi and Julie Hyman to discuss his global economic outlook. He says US growth presently remains "pretty good," as "really held up by the consumer" tapping excess savings. This spending boost may be extended by potential Federal Reserve interest rate cuts which could "create a better market environment, and will probably.... keep us out of a recession."
When it comes the 2024 election, Schwarzman says he'd "like to see what the public has to say." He argues that under Biden, the "regulatory environment has .. changed in a negative way," accelerating complexity for business operations versus prior years.
Watch the video above to learn where Schwarzman is seeing investing opportunities now.
This interview is part of Yahoo Finance's exclusive coverage from the World Economic Forum in Davos, Switzerland, where our team will speak to top decision-makers as well as preeminent leaders in business, finance, and politics about the world’s most pressing issues and priorities for the coming year.
Watch this full episode of Yahoo Finance Live here.
Editor's note: This article was written by Angel Smith
Video Transcript
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JULIE HYMAN: A lot of conversations being had on AI, on sustainability, on lots of topics, but also a lot of sidelines conversations about the global economy. And we want to have a frontline conversation right now on that topic amongst others. Stephen Schwarzman is joining us, Blackstone co-founder, chairman, and CEO of the firm with about $1 trillion in assets under management. Thank you so much for being here.
STEPHEN SCHWARZMAN: Well, thanks for inviting me.
JULIE HYMAN: So what are you hearing on the global economy from the folks who are gathered here? And is it changing what kind of your perceptions are of what growth is going to look like this year?
STEPHEN SCHWARZMAN: Well. Growth is pretty good, surprisingly. It really held up by the consumer. The consumer had lots of extra savings as a result of staying home during COVID and being paid the same but not having the expenses that they'd have commuting and buying their lunch out and things of that type. And they've been spending their money.
When they started running out, they enjoyed the spending so much, they were borrowing money. And then to the extent they have money in the stock market, the last quarter had explosive appreciation. And people tend to spend not a percentage of their income, but they spend a percentage of their wealth.
So if you make a killing and you have an extra $10 million that happens through some circumstance, you always end up spending more money because you feel that you have more. And so we have those three factors that have washed into the economy. Nevertheless, with higher interest rates, we can feel the economy slowing. That doesn't mean it's going down. It means the amount of growth you're having is less every quarter.
So we also see that inflation has really been tamed much more than has been reported publicly. So when the Fed starts lowering interest rates, it seems to be fascinating to everyone. It's not fascinating to me because all I care is that it's going to happen. And whether it happens in the second half or a little in advance, it doesn't matter.
But what matters is that people now expect that to be happening, and they're correct. And that will create a better market environment and will probably-- most probably keep us out of a recession. So when those rates really go down, we hit the 2% inflation, that'll give you a real impetus for another market cycle. So that's the way we see things.
JULIE HYMAN: Hear the sun coming out from behind the clouds just as you say that.
BRIAN SOZZI: Is it hard to find great investing opportunities in an environment that has traded up in advance of those rate cuts?
STEPHEN SCHWARZMAN: Well, you have to look other places rather than do just what everybody does. And there's always places like that. Energy transition is sort of-- these are all pretty much new builds of some type or modification. So that's not buying a stock market influence type of thing.
We have data centers, which are exploding with growth. They're all being constructed. So in effect, that's at book value, but worth much more after you buy them. European real estate, surprisingly, of the right type is very exciting. For technical reasons, the real estate is fine, but the people who own it are under a lot of pressure. And they're under pressure because in Europe, hard for Americans to understand that they had negative interest rates.
So if you were borrowing money, it really didn't cost you very much. Now it cost you 500 basis points more. So if you have a lot of borrowings and the cost goes up, not every owner of real estate but many of them are under real financial pressure. And the way you get out of that jam is by selling assets. So what we're seeing is people approaching us with pools of their assets enough to pay down enough debt. So that the banks won't worry them.
On the other hand, we don't like all the things they offer us. So what we typically do is say, hey, unlike Europeans who are a little scared of buying real estate, we have lots of money, we're eager to buy. But we only want to buy data centers or student housing or other of the few asset classes. Go back and look for them, and we'll take everything you have.
JULIE HYMAN: So you're being more selective in this market.
STEPHEN SCHWARZMAN: Absolutely. We don't have an enormous amount of time. And I do want to get some other topics. I want to ask you a bit about the election. And I know you've talked about this a bit already and said you're not ready to support a particular candidate, whether it be former President Trump or someone else at this point. What do you want to see before you are ready to make that kind of decision?
STEPHEN SCHWARZMAN: Well, as far as I know, there's only been one vote that's held.
JULIE HYMAN: It's true. No.
STEPHEN SCHWARZMAN: Unless you know something different. And I'd like to see what the public has to say with a number of shots on goal.
JULIE HYMAN: Do you want to see what the courts have to say as well? Is that going to be important?
STEPHEN SCHWARZMAN: I think there's a separate issue. And that won't be knowable for a very long time, as I understand it, based on what I read. And you know, so there are always uncertainties in all US elections. This one may have more than others.
BRIAN SOZZI: Some of the policies put in place by the current administration, has that helped your businesses at all?
STEPHEN SCHWARZMAN: I'm struggling on this one.
JULIE HYMAN: Nothing in the IRA that would be helpful for construction, for example?
STEPHEN SCHWARZMAN: There's a little in the IRA. But the regulatory environment has so changed in a negative way that-- one tends to look at these things as an integrated whole, not picking apart pieces of it. And this is a very accelerated regulatory environment that makes conducting business more complex than it ever was.
JULIE HYMAN: Lastly, I want to ask you about something that is not as much on the agenda here at WEF. Somewhat, it is. We heard from the Israeli President. We heard from some of the families whose loved ones are still being held hostage by Hamas. And I'm just wondering if you think that there has been enough global discussion of anti-Semitism and about the war in Israel here and globally.
STEPHEN SCHWARZMAN: Well, I think discrimination against any group of people is un-American. We don't believe that. We believe, certainly at Blackstone, that everyone is equal and that it doesn't matter you know what ethnic group they're in. It doesn't matter what religion they believe in. It doesn't matter to us what gender they have or what their sexual preferences are.
So when you see something like anti-Semitism, it violates not only our core beliefs, but based on those congressional hearings, it violated the core beliefs of almost everybody up on the hearing benches and in the country at large. So I think that it's very troubling.
And it would be if it was against any group. There's a whole issue on Islamophobia, and that's not fair. That's not the way things should be. So those of us who have what I used to think were American values really are troubled and want the society to address this type of problem.
