Blackstone’s Executive Vice Chairman Tony James recently warned investors about a looming “lost decade” for equity returns as stock investments turn “anemic.”
“I think this could be a lost decade in terms of equity appreciation,” he told CNBC, referring to a term commonly used to describe a period in the 1990s when Japan experienced economic stagnation.
He told CNBC that interest rates will normalize and companies will face “plenty of headwinds” that put pressure on earnings in the coming years.
“I think you can have disappointing long term earnings growth with multiples coming in a little bit, and I can see anemic equity returns over the next five to 10 years,” he said.
Near zero interest rates are the main driver of the recent climb in stock markets, he said.
“There’s a hunger for yield so investors are coming off the sidelines — there’s still a lot of money on the sidelines, actually — and looking for investments that they can get some kind of returns,” he added.
To be sure, investors are being advised to be savvy and sharpen their senses in this time of volatility.
Investment guru and money manager Bill Gross says investors should be shifting into shunned sectors such as tobacco, banks and European stocks as fiscal stimulus and the stomach for growing deficits in the U.S. wane, Bloomberg reported.
With an emphasis on defense, investors should consider assets that haven’t “skyrocketed on dreams of back-to-normal economic prosperity followed by even lower artificial real interest rates,” Gross, who retired last year, said in his recent outlook released.
“There is little money to be made almost anywhere in the world -- Covid 19 vaccine or no,” wrote Gross, who co-founded Pacific Investment Management Co. and later worked for Janus Henderson Group Plc.
Gross favors value stocks that pay healthy dividends, and says investors should consider using leverage to amplify returns. Central banks are unlikely to raise interest rates in the foreseeable future, lowering the risk a leverage trade would backfire, Gross said in an interview on Bloomberg television.
“You’ve got to lever,” he said. “You’ve got to be able to borrow.”
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