Blackstone Inc. · NYSE:BX
Blackstone — Q3 2023 Earnings Presentation
22 slides from Blackstone's earnings presentation, July 2023
Slide 1: Priced for a Soft Landing
CONFIDENTIAL Priced for a Soft Landing JULY 2023 Joseph Zidle Chief Investment Strategist Senior Managing Director, Private Wealth Solutions Byron R. Wien Vice Chairman, Private Wealth Solutions Blackstone To receiveInvestment Strategycommentary publications, please email BlackstoneStrategy@Blacksto
Slide 2: I. Hard vs. Soft Landing
CONFIDENTIAL I. Hard vs. Soft Landing Blackstone Investment Strategy Blackstone | 2
Slide 3: Household balance sheets remain healthy, with the assets to liabilities ratio at ~8.7x
HOUSEHOLD BALANCE SHEETS CONFIDENTIAL Household balance sheets remain healthy, with the assets to liabilities ratio at ~8.7x US Household Balance Sheets Household Assets to Liabilities Ratio (US$ in trillions) $180 10x $150 $120 8x $90 $60 6x $30 $0 ($30) 4x 1987 1991 1995 1999 2003 2007 2011 2015 2
Slide 4: Excess savings have fallen to ~$1.1T as fiscal support fades and consumption remains above-trend
EXCESS SAVINGS HAVE SO FAR PROVIDED A CUSHION TO THE ECONOMY CONFIDENTIAL Excess savings have fallen to ~$1.1T as fiscal support fades and consumption remains above-trend Flow of Excess Savings, by Contributor Excess Savings Level (US$ in trillions) (US$ in trillions) Consumption was below $2.50 3Q2
Slide 5: Treasury yield curve inversions have preceded each of the last six recessions
YIELD CURVE INVERSIONS CONFIDENTIAL Treasury yield curve inversions have preceded each of the last six recessions, with no false positives US 10-Year Minus 2-Year Yield US 10-Year Minus 3-Month Yield Curve Spread Curve Spread 3% 10 0% 5% 10 0% 90 % 90 % 4% 2% 80 % 80 % 70 % 3% 70 % 1% 60 % 60 % 2% 0
Slide 6: Half of all 30-year mortgages are below 3.25%, while two-thirds are below 4.2%
30-YEAR MORTGAGE RATE DISTRIBUTION CONFIDENTIAL Half of all 30-year mortgages are below 3.25%, while two-thirds are below 4.2% 30-year Conventional Mortgage Rate Distribution (share of mortgages at given rates) 16% Current Mortgage Rate 12% 8% 4% 0% ≤ 2.5 2.75 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75
Slide 7: Estimated monthly mortgage payments hit a record high of roughly ~$2,650
MONTHLY MORTGAGE PAYMENTS CONFIDENTIAL Estimated monthly mortgage payments hit a record high of roughly ~$2,650 as mortgage rates hover near 7% Estimated Monthly US Mortgage Payments $3,000 $2,500 Monthly mortgage payments are up 4.5x since 2012 $2,000 $1,500 $1,000 $500 2000 2002 2004 2007 2009 201
Slide 8: II. Anatomy of Markets
CONFIDENTIAL II. Anatomy of Markets Blackstone Investment Strategy Blackstone | 8
Slide 9: Total returns for the S&P 500 index outperform its equal-weighted counterpart
S&P 500 BREADTH CONFIDENTIAL Total returns for the S&P 500 index outperform its equal-weighted counterpart S&P 500 Weighted vs. Equal S&P 500 Weighted vs. Equal Weighted Index Weighted Index (indexed to 100 as of 12/31/2022) (year-to-date cumulative total return) 125 120 20% 115 110 11% 105 100 95 M
Slide 10: Crowd sentiment poll is now relatively optimistic
INVESTOR SENTIMENT CONFIDENTIAL Crowd sentiment poll is now relatively optimistic S&P 500 Composite Index S&P 500 Index Performance(1) Full History: 12/1/1995 – 7/18/2023 5,000 NDR Crowd Sentiment Poll is: % Gain p.a. % of Time Above 66.0 -0.2 27 57.0 – 66.0 from Above 2.5 17 4,000 57.0 – 66.0 from
Slide 11: Forward earnings estimates continue to hover near record highs of ~$220
S&P 500 EARNINGS CONFIDENTIAL Forward earnings estimates continue to hover near record highs of ~$220; may be vulnerable S&P 500 Forward 12-Month Earnings S&P 500 Earnings during Recessions(2) per Share(1) (peak-to-trough change) $250 1974– 1981– 1989– 2000– 2007– 1975 1980 1983 1991 2002 2008 0% $2
Slide 12: Dividend discount model shows implied S&P 500 price levels
DIVIDEND DISCOUNT MODEL CONFIDENTIAL Dividend discount model shows implied S&P 500 price levels at various levels of earnings and risk-free rates S&P 500 Dividend Discount Model 10-Year Treasury Yield 3.40% 3.50% 3.60% 3.70% 3.80% 3.90% 4.00% 4.10% 4.20% 4.30% 4.40% $195 5,657 5,174 4,767 4,419 4,11
Slide 13: III. Inflationary Pressures
CONFIDENTIAL III. Inflationary Pressures Blackstone Investment Strategy Blackstone | 13
Slide 14: Labor market data are beginning to move in the right direction, but remain tight
PROGRESS IN REBALANCING LABOR MARKETS IS STEADY, BUT SLOW CONFIDENTIAL Labor market data are beginning to move in the right direction, but remain tight with costs near record highs Change in Nonfarm Payrolls(1) Employment Cost Index(2) (MoM change, in 000s) (YoY%) 1000 5.5% June payroll growth was l
Slide 15: While inflation ex-shelter is moderating, rising home prices suggest disinflation may not be linear
INFLATIONARY PRESSURES CONFIDENTIAL While inflation ex-shelter is moderating, rising home prices suggest disinflation may not be linear Headline CPI (ex-Shelter) and Core CPI S&P/ Case-Shiller US National Home (ex-Shelter) Price Index (YoY%) (MoM%; seasonally adjusted) 12% 2.0% 10% 1.5% 1.0% 8% 0.5%
Slide 16: Inflation has decelerated quickly even as growth remains resilient
HYPOTHETICAL PATHS FOR US CPI CONFIDENTIAL Inflation has decelerated quickly even as growth remains resilient; but path to 2% may be bumpy Hypothetical Paths for US Headline CPI Hypothetical Paths for US Core CPI (implied YoY% based on assumed MoM% increases) (implied YoY% based on assumed MoM% incr
Slide 17: IV. Market Opportunities
CONFIDENTIAL IV. Market Opportunities Blackstone Investment Strategy Blackstone | 17
Slide 18: As public markets remain dislocated, private credit has gained market share
PUBLIC CREDIT MARKET VOLATILITY HAS LED TO MORE PRIVATE DEAL FLO W CONFIDENTIAL As public markets remain dislocated, private credit has gained market share Driver of Opportunities Growth of Private Credit Slowdown in US Leveraged Loan and High Yield Issuance(1) Private Credit Increasing as a Segment
Slide 19: Oil supply faces challenges as US rig counts and emergency crude stockpiles fall sharply
OIL INVENTORY CONFIDENTIAL Oil supply faces challenges as US rig counts and emergency crude stockpiles fall sharply Baker Hughes US Total Oil and Gas US Strategic Petroleum Reserves Rig Count(1) Total Inventory(2) (millions of barrels) $160 750 $140 700 650 $120 600 $100 550 $80 500 $60 450 $40 400
Slide 20: Demand for data centers has increased dramatically in recent years
DATA CENTERS CONFIDENTIAL Demand for data centers has increased dramatically in recent years Data Center Primary Market Inventory Total (MW) 3,929 3,358 2,870 2,578 2,126 1,822 1,519 1,330 2015 2016 2017 2018 2019 2020 2021 2022 Source: CBRE Research, CBRE Data Center Solutions, as of 6/30/2022. Bla
Slide 21: Disclaimers
DISCLAIMERS CONFIDENTIAL The views expressed in this commentary are the personal views of Joseph Zidle, Senior Managing Director, and Byron Wien, Vice Chairman, in the Private Wealth Solutions Group and do not necessarily reflect the views of Blackstone Inc. (together with its affiliates, "Blackston
Slide 22: Disclaimers (Cont'd)
DISCLAIMERS (CONT’D) CONFIDENTIAL Issued by The Blackstone Group International Partners LLP ("BGIP"), which is authorized and regulated by the Financial Conduct Authority (firm reference number 520839) in the United Kingdom. This communication is directed only at persons: (a) who are "Professional C