Stock market decline could reach 10 percent to 20 perfect – Tony James, Blackstone


Stock market decline could reach 10 percent to 20 perfect – Tony James, Blackstone

The chief operating officer at Blackstone, the private equity giant has said that stocks could witness a bear market this year the stock decline going to 10-20% possibly.

Tony James said that according to every historical norm, the present market is fully valued presently. He said that one could easily see a 10-20% correction sometimes later this year and we have already gotten a 5%.

On Friday, the S&P 500 was on the point of a 5% pullback from all –time highs. According to James, S&P could decline 15% further than the current levels. He said that it was not a question of whether the stock market was currently at fair value. The thing is that if you want any return, it is the only place to go.

Correction is a decline of at least 10% from the recent highs and bear market can be defined as a plunge of at least 20% from the recent highs. The last 5% pullback took place about a year and half ago and the last 10% correction occurred from mid-2015 to the early 2016. The last bear market was seen during the 2008 financial crisis.

Before the last week’s poor performance, the S&P 500 was off to quite a good start last month. Since Donald Trump was elected the President of United States in November 2016, the index was still up about 30% according to Friday’s close.

James said that the already strengthening economy could be further stimulated by the Republican tax law but could be negative for the stocks. He said he was entirely not too sure whether we are in need of a stimulus at the present moment. If you are concerned about inflation and interest rates, a stimulus could push us into a rate spike.

The bond market is already seeing a hike in rates. On Monday, the 10-year Treasury yield was trading around 2.8% about four-year highs.  Regarding the corporate tax cut, he said that the market is over estimating the added earning tax cut will bring.