The coming years could be a “lost decade” for equity investors, says Blackstone executive vice president Tony James. He predicts that the return on US stocks will collapse as companies will not be able to increase their revenues and profits. According to him, stock prices may not rise, since their assessment already includes a “horizon of 5-10 years”.
James points out that US interest rates are unlikely to fall, and may even recover in the coming years to more normal levels. Higher interest rates have a negative impact on corporate profits and stock prices. Higher borrowing costs will reduce profits and hence prices.
Moreover, companies face a number of problems, he added, including higher taxes, rising operating costs, less efficient supply chains and “deglobalization” that will disrupt productivity, James said.
Despite the crisis described as the worst since World War II, US markets have risen to new heights. According to James, the momentum is due to the reduction of interest rates by the Fed, which led investors to look for more profitable and risky assets.