Tags: Starwood | Sternlicht | Investors | CNBC

Starwood's Sternlicht: 'Nervous' Investors Sense 'Party Is Over'

Image: Starwood's Sternlicht: 'Nervous' Investors Sense 'Party Is Over'

By    |   Tuesday, 06 Oct 2015 12:57 PM

Starwood Capital Group chief Barry Sternlicht says the recent market volatility has kept investors on edge, and for a very good reason: It all may get worse.

"It feels like the market is telling you the party is over," Sternlicht told CNBC. "Everyone feels like we haven't seen what's around the corner, behind the curtain, and we're nervous," he said.

To be sure, there are conflicting economic signs, he said.

"The facts look pretty good — the United States, in particular looks pretty good, England looks pretty good, [and] Eastern European countries ... look pretty good," he said.

However, global woes remain such a concern that the International Monetary Fund predicted Tuesday that China's slowdown and tumbling commodity prices will push global economic growth this year to the lowest level since the recession year 2009, the AP reported.

The fund says the world economy will grow 3.1 percent this year, down from a July forecast of 3.3 percent and from 3.4 percent growth last year.

The fund predicts the United States will grow 2.6 percent this year, up from a July forecast of 2.5 percent and from 2.4 percent growth last year.

Sternlicht pointed one particular U.S. economic bright spot.

"Housing sat out most of the recovery, but it's actually doing pretty well," said Sternlicht, whose $45 billion investment firm has a heavy emphasis in real estate, CNBC reported.

"The biggest issues in the housing market are jobs. They can't find the workers" because of the low labor-participation rate at a time of nearly full employment, he said. "It's not demand."

But other prominent voice also have warned about the U.S. economy.

Bill Gross, who in January predicted that many asset classes would end the year lower, said U.S. equities have another 10 percent to fall and investors should sit out the current volatility in cash.

The whipsaw market reaction to the lackluster U.S. jobs report last week shows that markets, especially stocks, high-yield bonds and some emerging market debt, are trading like a casino, Gross told Bloomberg.

Gross, who earlier made prescient calls on German bunds and Chinese equities, said U.S. stocks will drop another 10 percent because economic conditions don’t support a rally like in 2013, when corporate profits were going up.

“More negative numbers lie ahead and if you define a bear market by a 20 percent correction, at some point — that’s six to 12 months — we’ll have a classic definition of a bear market, meaning another 10 percent downside,” he said.

“Cash doesn’t yield anything but it doesn’t lose anything,’’he said. “Investors need cold water splashed on their face and sit out the dance.”

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StreetTalk
The reasonably healthy U.S. economy is doing little to assuage investor concerns about the stock market, and all the conflicting signs makes it feel like we're "standing in quicksand," Starwood Capital Group chief Barry Sternlicht said Tuesday.
Starwood, Sternlicht, Investors, CNBC
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2015-57-06
Tuesday, 06 Oct 2015 12:57 PM
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