Jim Coulter, the founding partner and executive chairman of TPG has said the first chapter – of the three phases of the downturn currently faced by investors, is close to being complete.
According to him, the market has now been through multiple resets, which given where equity valuations were last year, is something investors should have seen coming.
The billionaire told CNBC that what comes next will further weigh on stocks as inflation hits earnings across the S&P 500 and current expectations prove to still be too high.
He also said that a time would come when cash would be required to be put back to work in the broad market.
What the billionaire is saying
Noting that valuation remains significantly above the 10-year average, Coulter said that the phase may not quite be over yet given that it tends to shoot through the average in a moment like this and investors need to prepare for that.
In his view, the second chapter should be the focus now for the next major equity stress. “We are now going into the second chapter and it is earnings,” he said, adding that when an investor looks across the market, earnings “haven’t yet turned over.”
He, therefore, pegged that the third chapter – which is the landing – will begin sometime next year and that it’s a question for all investors. However, he stressed that he isn’t placing a bet on a soft landing for the economy.
“Personally, I hope it’s hard and fast. When hard and fast happens the market then begins to look forward and if you look at what happens in markets when they turn, it is after a recession hits, if it is going to hit,” he said.
He noted that if investors remain in the position of watching the Fed still chasing as a result of inflation, rather than making the next formal shift in policy, the stock market won’t react positively.
What you should know about Jim Coulter
- In addition to being the co-CEO and founding partner of private equity giant TPG, which managed over $100 billion in assets as of September 2021, Coulter is also co-managing partner of TPG’s Rise Fund, a private markets impact investing platform that manages over $11 billion.
- Coulter serves on the boards of several organizations, including Creative Artists Agency, Philz Coffee, and Rodan + Fields.
