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Donald Trump’s tariff regime pummelled Wall Street’s most powerful investment groups, many of which had expected just months ago that the president’s policies would fuel a golden age of economic growth and dealmaking.
Shares in some of the world’s biggest private capital groups including Apollo Global Management and KKR dropped more than 12 per cent on Thursday, while Blackstone dropped nearly 10 per cent. Credit-focused companies, including Ares Management and Blue Owl, also suffered as investors marked down growth expectations and some dealmakers said the default rates on low-rated loans could continue to rise.
Legions of US financiers thought the president would usher in a business-friendly period free of regulatory hurdles. Share prices of financial groups swelled in the run-up to Trump’s election, but have stumbled since December as the reality of the incoming administration’s tariff plans sank in. Shares of some companies — KKR and Ares — have fallen more than 30 per cent from recent highs.
“This is a huge step back for globalisation,” said Robert Koenigsberger, founder of Gramercy Funds Management, an investment firm focused on emerging markets. “It materially increases the risk of a recession and materially increases the risk of stagflation.”
Trump’s latest tariffs include a 10 per cent universal tax on all countries’ imports, including the UK, and a 20 per cent rate on the EU. The White House also targeted certain countries such as China and Vietnam with far higher rates.
“He can be a man of some bluster and exaggeration so the market had a false sense of comfort and didn’t believe he would be as aggressive as he ultimately was,” said Stefan Selig, the former US under secretary of commerce and ex-executive vice-chair for global investment banking at Bank of America. “We are entering into a world where there is now more uncertainty than we have seen perhaps since the end of World War II.”
At least one investor had made it out unscathed in Thursday’s bloodbath: billionaire Warren Buffett. Shares of his sprawling industrials-to-insurance conglomerate Berkshire Hathaway were little changed. The investor had dramatically cut his exposure to publicly traded US equities last year, including Apple, investing instead in short-term Treasury bills.
Others were less fortunate.
Bill Ackman, the billionaire founder of hedge fund Pershing Square, had proclaimed Trump as leading the most “pro-growth” and “pro-business” administration in recent memory and expressed bullishness on markets as the president returned to office.
Now Ackman’s portfolio, which had recorded gains this year of more than 10 per cent by mid-February, has turned negative as some of his largest holdings, such as call options on sportswear maker Nike, have plunged in value. Shares in the company slumped more than 14 per cent on fears tariffs will hit its bottom line because of levies of more than 40 per cent against Southeast Asian manufacturing countries including Vietnam, where it has key production hubs.
As of Monday, Pershing Square had lost 1.2 per cent for the year, based on the firm’s public disclosures. It reported no hedging positions. Pershing Square did not respond to a request for comment.
The share plunges across Wall Street and corporate America reflected a souring mood in the private capital universe as top industry executives warned of a significant slowdown in dealmaking, and some told the Financial Times they were preparing contingency plans for a recession hitting their portfolio companies.
The level of uncertainty, many predicted, would cause buyers and sellers to step away from deals. That will hit profits of private equity groups, which have for years struggled to sell investments and return profits to investors. Top industry executives including Blackstone president Jonathan Gray and Carlyle chief executive Harvey Schwartz entered the year optimistic deals and initial public offerings would allow them to return cash in 2025, but that rebound has failed to materialise.
“This is just a function of worries around 2025 realisations now coming in worse than expected,” said Jim Tierney, chief investment officer for concentrated US growth at AllianceBernstein. “That typically has a meaningful earnings impact.”
Some industry executives also warned the recent market slump has caused unlisted assets to soar as a percentage of the overall portfolios of large pensions, creating newfound risk they will reduce private exposure to rebalance. Last year, private equity fundraising slid 23 per cent.
Meanwhile, bank stocks also suffered. Goldman Sachs was down nearly 9 per cent, while JPMorgan Chase’s shares fell more than 7 per cent, as investment banking fees are expected to dip with a dealmaking slowdown.
Selig said: “What we now know for sure is that when Trump says tariff is the best word in the dictionary, he really believes it.”
