Eighty-six-year-old Byron Wien, Vice Chairman in the Private Wealth Solutions arm at Blackstone Group (BX) has experienced all of it, from peak to trough and back to peak in a storied career.
In a conversation with TheStreet in late-February, he offered his take on a market riddled with highs and lows. After a selloff in early February, stocks appeared to stage a comeback. But again on Thursday, March 1, stocks tumbled hard and fast on news President Trump will enact steel and aluminum tariffs that could dramatically increase the cost of doing business in the U.S.
So what does this market legend have to say about investing in this volatile, up-and-down market?
Don't Assume the Worst Is Over
"I think everyone is assuming the markets are roaring back and that the correction is over and we are going back up to new highs again, I am a little skeptical of that," Wien told TheStreet Feb. 20.
"We have more evidence that interest rates are rising, that inflation is going to be more of a problem. Average hourly earnings are increasing. I think commodities prices are going to be increasing because of world growth. I think we will have more talk about inflation. The bond market rally that began in 1982 is over. So interest rates are going to be rising," he said.
Wien's comments are even more applicable today than they were two weeks ago. New Federal Reserve Chairman Jerome Powell testified to Congress this week. Although he said there's no evidence of overheating in the economy, fundamentals are strong and the Fed is still planning for gradual rate hikes.
"I think all of this will be tough for the stock market. The Fed will be tightening. The European Central Bank will be tapering. So, there will be a less accommodative monetary policy environment. I still think the market will end the year higher than we started, I just think we will go down and test the lows again," Wien said.
Don't Get Complacent
Corporate earnings season is winding down, but it had an enormous effect on the stock market. In a late-February note, FactSet said 90% of S&P 500 companies had reported financials for the quarter. Of those, 74% reported positive earnings surprises. The S&P has so far tallied a blended earnings growth rate of 14.8%, which as of publication was the highest since 2011. At the end of 2017, analysts forecasted just 11% growth for the fourth quarter being reported now.
"People were investing in equities with impunity. They thought there was no risk," Wien said of investors beting on strong guidance and a spate of earnings beats. "The correction taught them that there is risk. I don't think they fully learned their lesson though. Now that the market has turned around so sharply, everyone is complacent again. I think they have to have some of that complacency beaten out of them," Wien said.
Maybe this new market downturn will help in beating the complacency out of Wall Street.
Do Take Advice From the Experts
As far as investing for the average market player, Wien said he or she is best suited to stay the course. Don't get distracted by record highs or massive earnings-propelled swings in value.
"They should pay a lot of attention to their conviction about the earnings growth rate and the multiple they are paying. They should have a firm valuation discipline and when stock prices get beyond that, they shouldn't be buyers. They shouldn't buy on the surge in the market, they should buy on the value of the underlying entity," Wien said.