Many billionaires and business leaders are sounding the alarm about inflation, the January stock market crash and the economy in general.
David Rubenstein is not one of them.
The private equity billionaire and co-founder of the Carlyle Group says the economy will be fine. He went on the air Tuesday to reassure the American public that talk of inflation is exaggerated and that fears of an imminent recession fueled by COVID-19 are wrong. He also dismissed concerns about how bad the stock market was getting.
“I don't see a big, giant market correction of the kind that's going to push us into a recession. I don't see that at all," Rubenstein said on CNBC. "I think the market correction will be moderate compared to what we've seen in the past when you've had a giant correction."
Rubenstein's Carlyle Group, one of the world's largest private equity firms, has $301 billion under management worldwide. He is a major philanthropist and has donated millions to institutions such as Harvard and PBS. And he had a front-row seat to historic inflation, serving as senior adviser to President Jimmy Carter, whose presidency was crippled by the Great Inflation of the 1970s.
This isn't the same situation the United States faced during stagflation in the 1970s, Rubenstein said. "When I was in government, we had a different situation," he said, referring to his time as Carter's assistant for domestic policy. "Inflation was in double digits, the policy rate went up to 20%," he said. "We don't see any of that."
Still, technology stocks started the year with a shocking decline, propelling the S&P into correction territory in January just as the Federal Reserve signaled its intention to hike interest rates at an aggressive pace. Inflation is at a 39-year high as consumer prices rose 7% in 2021.
The Fed also warned that it was time to drop the word "temporary" for inflation, meaning prices could rise uncomfortably for longer than expected. Federal Reserve Chair Jerome Powell said during a congressional hearing in December that "factors pushing up inflation will persist well into the week." next year."
Economists polled by Bloomberg expect inflation to rise 7.3% in January.
Rubenstein defied economists' predictions that more trouble was to come. CPI rises are temporary, he said, going so far as to say inflation will fall back to 4% or 5% this year.
The Fed, he said, is likely to raise rates by 25 basis points in March, but not at all subsequent meetings.
Nor is it the first time during the pandemic that Rubenstein has struck up such a positive tune. In November 2021, he told CNBC that comparisons to 1970s-style inflation were wrong. The structure of the economy is different today than it was 50 years ago, he said, and more resilient to the threat of inflation. The industry is more diverse, unions are not as dominant and there is less reliance on foreign oil wells.
Inflation would rise above 2%, the Fed's target, "for a while," Rubenstein said, but fall by spring.
The market, he said, doesn't appear to be "overly concerned" about inflation.