Tariffs Effect On Blackstone

 

Since 'Liberation Day', the 2nd of April when President Trump announced sweeping tariffs increase Blackstone Inc.'s stocks is down circa 16 %.

The market is assuming the probability of a recession is higher now, which if turns out to be true will hurt the capital intensive, profit making companies in Blackstone's private equity portfolio, its real estate investment portfolio and its private credit loans disbursed to medium sized companies at high interest rates, which will be hurt during a recession, according to Wolfteam Ltd.'s projections and estimates.

It is true that initially Blackstone's private equity, real estate and private credit business will be hurt if there is an economic slowdown. But the Federal Reserve already announced that it is decreasing the pace of its balance sheet run off and it is also highly likely that the Federal Reserve will step in and decrease the Federal Funds rate more than the two times in 2025 currently forecast by Wall Street economists.

It is true that Wall Street economists have swiftly raised the estimates of Federal Reserve interest rate cuts to three and even four in 2025 in the wake of higher than expected tariffs, the stock market's large fall and the dramatic decrease of 10 year US Treasury yields to below 4 %.  

The probable lower interest rates and more money in circulation will support Blackstone's current private equity portfolio as the companies therein will be valued using lower discount rates and will be consequently valued higher than in a higher interest rate environment. Lower interest rates will also improve Blackstone's private credit and real estate portfolio as loans will be disbursed at lower rates and real estate will be valued higher with lower discount rates, according to Wolfteam Ltd.'s projections and estimates.

In short, after a probable fall of 30 % or even more Blackstone's market capitalization could recover and even surpass markedly previous levels in Wolfteam Ltd.'s view. 

A risk for the above forecast is if the Magnificent 7 Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla technology stocks fall more than 40 % from their recent peaks. This will drag down the value of technology along the curve. Blackstone's investment portfolio is heavily exposed to technology and technology public stocks and private technology firms' value disruption, which could be defined as a fall by more than 40 % could temporarily bring Blackstone's portfolio in disarray.