Blackstone, Cornell Capital on US tariffs, investor trends

Blackstone and Cornell Capital have urged investor patience through tariff diplomacy and see opportunities through the turmoil.

Blackstone global president Jon Gray. Picture: John Feder

Top US money managers have urged investors to be patient through Donald Trump’s tariff upheaval and warned against reactive short-term moves.

Jon Gray, president of alternative asset giant Blackstone, said the US administration’s tariff diplomacy had already led to changes, including for other countries to share some of the defence burden, and would bring about more.

“The US administration has certain objectives they’re trying to get at, and they’re using tariffs to achieve those. The hard part for investors is oftentimes what comes out initially could be disconcerting, and so what you need is a little bit of patience,” Mr Gray said at the Asia Pacific Financial and Innovation Symposium in Melbourne on Tuesday.

“Watch this tariff diplomacy evolve and make your investment decisions over a longer period of time. I think the danger in a period like this is you do something short term and you lose opportunity,” he cautioned.

“The end game is you will see changes. We’ve seen them (already). The Germans came out and said they’re going to spend a meaningfully greater amount on their defence and we’ve seen in Mexico, announcements about more border security on their side.

“Ultimately, the alliances that have existed for a long time continue to exist but I think it will be a resetting,” he said.

Henry Cornell of US private equity specialist Cornell Capital said tariffs were central to Mr Trump’s plan to ‘make America great again’ but that his firm saw opportunities through the turmoil.

“He uses (tariffs) as a bargaining tool with international leaders and if his focus remains on more onshoring back to the US, be aware that those involved in exports or import businesses will have to deal with a very unsettled tariff policy,” Mr Cornell said, as he urged investors to a longer investment view.

“We operate in an interdependent world, and no matter what political focus on onshoring exists, retreating into fortress America is neither realistic nor sustainable. As investors, we have to take a long-term view and recognise that global connectivity remains a fundamental driver of economic growth.”

The America-first approach will likely lead to further clashes between the US and China, he warned.

“At the same time, Xi Jinping can play a different game. He doesn’t have an election to face. He’s not going to lose, potentially, the Congress in two years, so he is going to manoeuvre himself around this. And I’m not sure our president completely understands that,” he said.

“But there are sectors of shared strategic focus and interdependence that can still be exploited, and we’re finding that in our portfolio and with our peers in the industry.

“My strong view is the best way to mitigate risk is to take a global platform approach and incorporate cross border investment. It has historically played an important role in fostering stability. It remains a crucial tool for ensuring economic interdependence, and the strategy allows investors to remain diversified and maintain the ability to pivot as conditions change.”

With China and the US, there is an opportunity to find common ground, Blackstone’s Mr Gray said.

“More balance in trade, be it through aircraft, wheat or LNG, could get tensions down. And I think the administration is willing to engage in discussions. There will continue to be more friction around national security and technology and in those areas I think there will be more separation. But I do believe there’s an opportunity here for some sort of negotiation,” he said.

Turning to the booming private credit market, Mr Gray said it was a long-term mega-trend.

“You’re taking investors — super funds — and you’re bringing them right up to borrowers … That farm-to-table model allows you to generate higher returns. It started in direct lending, in non-investment grade lending (but) the real evolution that’s coming is the movement toward private investment grade credit. And that’s something Apollo (and Blackstone) are spending enormous amounts of time on,” he said.

He sees US inflation as “heading to a better place” and expects the US Federal Reserve to cut rates again this year.

“The Fed’s target is 2 per cent. They’re obviously going to be a little bit patient here to see what happens with tariffs and costs (but) I think the Fed will have room to cut rates maybe a couple of times this year, which will give other central banks in the room as well.”

Originally published as Blackstone, Cornell Capital on US tariffs, investor trends