Worries about the Federal Reserve hiking interest rates more aggressively to combat rising inflation should not overshadow the benefits of stronger economic growth, the billionaire co-founder of Blackstone Group told CNBC on Thursday.
With economic growth and inflation on the rise after years of historically low levels, bond yields have been spiking and putting pressure on the stock market. When bond yields rise, investors often start weighing whether stocks are the only game in town for return.
However, Schwarzman encouraged investors not to lose sight of the big picture: "We have to look at what's going on in the world; the real world, not the markets."
The Dow Jones industrial average got out of the gates in the new year like gangbusters, surging to an all-time high on Jan. 26. But a week later, the Dow hit a brick wall, logging a two-session plunge of more than 7 percent. After a two-day respite, the Dow sank another 4 percent, marking a 10 percent drop from record highs. But since then, the Dow has rebounded from correction territory, entering Thursday's trading day on Wall Street on a four-session winning streak.
The stock market got ahead of itself in January, so the early February pullback was not out of left field, Schwarzman said. "When you go up 7 or 8 [percent] in the first month of the year, you have to imagine compounding that rate in the 80s or 90s."
"Markets get ahead of things and markets get behind things," he argued. "The real world looks like it's in fine shape at the moment."
Schwarzman said he sees economic growth of the developed world of at least 3 percent.
"Economies are expanding all over the world. It's one of the few times that happens," he said.
"If wages go a little higher than people think, those wages are going to people who need the money, frankly. And that's not a tragedy. That's a good thing."
The chairman and CEO of private equity giant Blackstone, with $434 billion in assets under management, also downplayed the impact of the Fed acting more forcefully on increasing the cost of borrowing money.
"We have been at such low levels. We've been stimulated in a really favorable way for 10 years," Schwarzman said. "It may slow housing a bit, but businesses will power on right through it."
Schwarzman had been chairman of President Donald Trump's strategic and policy forum before it was disbanded last year. The CEO advisory group was dissolved following an uproar over remarks the president made about the August white supremacist rally in Charlottesville, Virginia.
In an interview last month from the World Economic Forum in Davos, Switzerland, Schwarzman said Trump's policies, including the new tax law, will provide a big boost to U.S. economic growth. He said Trump can take credit for improved business confidence and the stock market.
Even though the market has hit a rough patch, the Dow has still gained about 35 percent since Trump was elected president in November 2016.