I'm wearing my boots here today because it's been snowing in New York, but it's always sunny somewhere when it comes to investing. Hello, I'm Jon Gray and welcome to Market Views. This is a great program. Today we're gonna talk about what's happening in the economy and inflation.
We're gonna talk about this AI revolution. We're going to talk about some of the individual asset classes where we deploy capital. And we're going to talk about the importance of not listening to the noise and focus on what's really happening on the ground — the economic weather report.
Now, we should have flashing lightning bolts and stuff when I do that. I'd say it's pretty good.
As it relates to the U.S. economy, it really has been a battleship. It absorbed Liberation Day, the government shutdown, lots of geopolitical issues, and it just kept powering ahead.
When you listen to the news, you can get discouraged. And yet, if you just focus on what's happening with companies — and we have the advantage of 270 companies and 13,000 pieces of real estate — what we see is encouraging.
Our companies in private equity had 9% revenue growth in the fourth quarter, which is pretty exceptional. We continue to see a low level of defaults across our private credit portfolio. There's some weakness on the consumer side with lower- and middle-income consumers.
Europe is slower; we see less revenue growth there, but overall it's a pretty good picture.
I'd say the headline on inflation is it continues to decelerate, particularly around shelter costs where the government data lags. It's north of 3% in the government data. Across our large rental housing portfolio, it's running less than half of that.
We also see a labor market that continues to soften a bit, and these are the reasons why I think the Fed will have the opportunity to bring rates down, which will help valuations, will help transaction activity. So inflation has gone from being obviously a massive problem three or four years ago to sort of a steady declining problem that, hopefully, here over the next year or two really goes away. When you put that all into the grinder, that's pretty good.
Everybody's focused on bubbles, and there definitely will be misallocations of capital as this AI revolution moves forward. But to me, the biggest thing is the disruption that's coming. If you go back in time, the Yellow Pages — they were an amazing business, and then the internet came and they disappeared.
We've seen announcements from insurers that if you use the Tesla self-driving feature, which is AI-driven, they're gonna lower the rates — your insurance rates — by 50%.
What's that gonna mean for auto insurance? What's that gonna mean for collision repairs over time if we have far fewer accidents?
So I think anticipating the kind of change that can come is probably the most important thing we as investors can do.
This is a great entry point for real estate investing. I think we're getting closer to the steeper phase of the recovery. It has been a four-year period that's been pretty tough. And now what we're seeing is a bunch of green shoots that are emerging in real estate.
Because we're not building as much, we're starting to see improved fundamentals. So in the fourth quarter, in our Link Logistics portfolio, we saw the best leasing volume ever, up 38% year on year. We've seen terrific performance in our real estate credit area as fundamentals have improved and loans have gotten refinanced.
We saw the best office leasing volume in New York City going back to pre-COVID periods. It's been six years since we've seen these kinds of volumes. Again, another positive sign.
Transaction activity is up 21% in real estate in 2025 over '24. And so you can feel the tumblers start to fall into place here.
That will be very positive, we think, for real estate over time. And investors have this habit of driving their car looking backwards, and you wanna be looking ahead. And real estate clearly makes the case for that.
In private equity, we've been through a period of time where transaction activity really slowed. And now we're seeing it start to pick up. Many people have been holding assets for a long period of time — be it businesses, families, other private equity sponsors. So there's a big universe of things that have sort of been trapped in the system. And as that starts to move, that creates opportunity.
It does remind me a little bit of the 2013–14 period, where after, you know, sort of a painful downturn, and then a recovery, we had a whole rash of companies we took public. Transaction activity started to pick up, and that reminds me of that period we're in now.
It feels like a good moment to be deploying capital in the space, and when I just look at the memos I read, I feel pretty good about the investment environment we're into today when it comes to private equity.
