Politics & MoneyInvestments

Blackstone adviser: Investors worried about ‘serious correction’

Byron Wien still holds his line

A global economic advisor to private equity firm Blackstone (BX) is warning that he may need to change his positive outlook on 2014 if housing stays slow.

Furthermore, he’s not the only one.

Vice Chairman of Blackstone Advisory Partners, Byron Wien’s monthly market commentary for August cites positive to complacent attitudes of secondary market investors, but also fires a warning.

“The indicators are not universally positive,” he writes. He then cites slow housing data before moving onto monetary policy changes from the Federal Reserve.

“Many investors are worried about a shift in Federal Reserve policy triggering a serious correction in the market,” Wien said.

The housing numbers first. Housing starts dropped to 893,000 in June. Building permits also declined

“For the economy to move toward 3% real growth in the second half and for unemployment to continue heading to lower levels, housing has to be strong,” he said.

“But there are enough other positive signs that I am not altering my favorable forecast,” he adds. “If housing continues to be weak, I will probably have to change my view.”

Wien also sources a Bloomberg Global Poll that found 47% of stock investors think the market is close to a bubble, with 14% saying we are already in one. 

Going into the Federal Open Markets Committee meeting later this week, one of two major data points that may make or break housing, Wien said reserve Chair Janet Yellen’s recent comments toward the zero-interest rate policy are ambiguous at best.

Wien said that when Yellen gave testimony to the Senate Banking Committee that “a high degree of monetary accommodation remains appropriate,” later became countered with “if labor market conditions improve more quickly than anticipated, then increases in the Federal Funds rate target likely would occur sooner and be more rapid than currently envisioned.” 

“Based on Chairman Yellen’s comments on the economy, I do not think an increase in short-term rates is imminent, but if GDP growth looks like it will exceed 3% sometime in the second half, a rate hike is possible,” Wien interprets. 

“My own view is that we won’t see a rise in rates until mid-2015,” he concluded.

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