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Blackstone's Schwarzman: Market Drop an 'Overreaction'; Picks Trump Over Cruz

Blackstone's Schwarzman: Market Drop an 'Overreaction'; Picks Trump Over Cruz

By    |   Thursday, 21 January 2016 12:36 PM

Stephen A. Schwarzman, the billionaire founder of investment giant Blackstone Group, said this year’s stock market turmoil is an “overreaction” among investors who are worried about collapsing oil prices and China’s economy.

He also said he would vote for Republican front-runner Donald Trump if given a choice between the real estate developer and Texas Sen. Ted Cruz.

“China is slowing but not collapsing and I think there's an overreaction to what's going on there,” he told CNBC in an interview from the World Economic Forum in Davos, Switzerland. “Their consumer economy is growing quite well. Services are growing. They created 14.4 million jobs last year against their normal expectation of 10 million when the economy was growing faster.”

China this week said gross domestic product grew 6.9 percent in 2015, the slowest in 25 years. The growth rate for the world’s second biggest economy has been in a steady decline from 9.5 percent in 2011. The slowing growth has pressured U.S. stocks, with the S&P 500 index falling about 8 percent in January.

Schwarzman acknowledged that China is seeing weakness in its manufacturing industries, pressuring the demand for raw materials like iron ore and coal.

“If China can settle down overtime to grow at a 5 percent rate in a long-term service economy, that would be a good thing. The disruption as you get there is really substantial,” said Schwarzman, who founded Blackstone in 1985 with former U.S. Secretary of Commerce Peter G. Peterson.

Schwarzman said the next U.S. president will need to promote greater consensus in Washington.

“Where we find ourselves as a country now is: it’s almost like some kind of odd protest moment,” he said to CNBC. “The question is what is everybody protesting about. There's a lot of things that you could but what is needed actually is a cohesive healing presidency not one that's lurching either to the right or to the left.”

Schwarzman’s top economic concerns are:
  • Collapsing oil prices aren’t the result of slowing Chinese demand as much as the oversupply from OPEC countries and U.S. shale producers.
  • Opportunities in the energy industry will be found as oil prices stabilize and recover.
  • Geopolitical risks are prevalent in the Middle East, particularly with ISIS, Saudi Arabia, Iran and Syria. The exodus of Syrian refugees to Europe is also creating uncertainty.
  • U.S. electorate seems angry with Washington.
  • Federal Reserve may risk a recession by raising rates too soon for “some theoretical reason” of needing monetary tools in the future.
  • Fiscal stimulus would help the U.S. economy, but political divisions are preventing spending.

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Stephen A. Schwarzman, the billionaire founder of investment giant Blackstone Group, said this year's stock market turmoil is an "overreaction" among investors who are worried about collapsing oil prices and China's economy.
Blackstone, Schwarzman, Trump, Cruz
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2016-36-21
Thursday, 21 January 2016 12:36 PM
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