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Blackstone, the biggest owner of commercial real estate in the world, is placing its bets on the student housing rental market as demand surges worldwide.
“Student housing is, I think where the opportunity is most specifically generating a lot of strong cash for us and our investors,” as universities seek more accommodations to satisfy growing student bodies and heightened demand, said Kathleen McCarthy, Blackstone’s global co-head of real estate, speaking at CNBC’s Delivering Alpha conference Thursday.

She highlighted last year’s acquisition of student housing provider American Campus Communities as one way Blackstone can work with universities to increase supply amid shortages. The company, she added, also focuses on rental housing because it shows a “great deal of resiliency.”
Last year, the company made a sizable bet on the real estate industry, raising a little more than $30 billion for its Blackstone Real Estate Partners X fund, which McCarthy highlighted as another way the company is using its insights to provide consistent performance for investors and confidence amid a market with heightened “dislocation.”
But student housing issues aren’t solely a U.S. problem, and Blackstone has made investments in Australia, Canada and the U.K. as students seek English-language degrees, McCarthy said.
“Those countries are really looking at education as somewhat of an export, and, where the U.S. has had more challenging visa policies, those countries have been able to capitalize on that, and are seeking to grow their universities but they need housing to do that,” she said.
Along with student housing, McCarthy also highlighted datacenters and logistics as other key conviction real estate areas as artificial intelligence booms and consumers do more online shopping.
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A recession is all but inevitable for the U.S., and investors should be playing defense in that kind of environment, TCW CEO Katie Koch said.
Koch said the Federal Reserve’s interest rate hikes targeted at slowing the economy and bringing down inflation will start to bite.

A recession is all but inevitable for the U.S. and investors should be playing defense in that kind of environment, according to the head of the TCW Group.
“We are going to have a recession, because that’s the way the world works,” Katie Koch, CEO of the firm with $210 billion under management, said Thursday at CNBC’s “Delivering Alpha” conference. “We haven’t had a real one for over a decade and a half.”

While Wall Street has been bracing for a contraction for much of the past two years, the U.S. economy has stayed afloat due largely to a resilient consumer flush with cash and a labor market that has remained powerful.
However, Koch said the Federal Reserve’s interest rate hikes targeted at slowing the economy and bringing down inflation will start to bite. Higher rates have long been thought to work with lag effects, the timing of which is uncertain and dependent on a variety of factors.
“I do think it pays to be patient and wait to see higher rates work their way through the system,” Koch said. “We haven’t seen the pain of higher rates, but it’s coming.”
From an investment standpoint, Koch recommends a mostly conservative array of choices that includes cash. She also spoke favorably of agency debt, mortgage-backed securities and Treasurys, as well as companies that have longer-duration capital.
But Koch worries about consumers as well as companies that have used the “extend and pretend strategy” to put off paying down loans.

“That is the bedrock of the U.S. economy, obviously the consumer and small and medium companies, and I think they are going to struggle to finance themselves in this environment and that further leads us to a relatively bearish outlook,” she said.

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October is expected to be a particularly big month for holiday shopping, with consumers planning to start earlier and spend more than before.
It’s also the month when millions of borrowers will face their first student loan bill in more than three years.
So far, U.S. households have remained remarkably resilient. The resumption of student loan payments pose the next big threat.

October is unofficial start of holiday shopping season

This year, half of shoppers plan to begin their holiday shopping by Halloween, according to a recent Bankrate report.
A separate study by RetailMeNot found that more shoppers are starting even earlier than before — with as many as 64% kicking off the season in October, up from 53% in 2022.

Early estimates point to a strong shopping season

With more shoppers getting an early start on the season, holiday retail sales are likely to increase between 3.5% and 4.6% in 2023, according to Deloitte’s annual forecast.
“We expect healthy employment and income growth to keep the volume of sales growing for the 2023 holiday season,” said Daniel Bachman, Deloitte’s U.S. economic forecaster.
And despite predictions that people are shopping earlier to take advantage of sales and spread out their holiday expenses, research from Morning Consult found that early shoppers are splurging, not saving. 

So far, consumers have remained remarkably resilient. However, there are recent signs of a shift.
Shoppers are still buying more than last year, but spending growth is slowing as the economy settles down, according to the National Retail Federation.
Going forward, “we expect moderate growth to continue despite uncertainties like the direction of inflation and interest rates as well as a potential government shutdown,” NRF President and CEO Matthew Shay said in a statement.
“Households have the capacity to spend, but momentum is slowing, in part because savings built up during the pandemic are running lower and credit costs are rising,” added Jack Kleinhenz, the NRF’s chief economist.

Student loans payments could weigh on wallets

“Student loan payments are another drag on the consumer,” said Brett House, professor of professional practice in economics at Columbia Business School. 
“On the one hand, higher interest rates are constraining household budgets,” House said. Inflation has shown some signs of cooling but remains well above the Fed’s 2% target, leaving open the possibility of another interest-rate increase to come.
“On the other hand, labor markets remain strong,” House added. An unemployment rate of 3.8% is just slightly higher than it was a year ago. Job openings have been coming down, but “we still have very high participation rates,” he noted.

When it comes to consumer spending, “the biggest factor is always whether people have a job or not and we are near full employment,” House said.
Still, roughly half of borrowers are worried that the end of the payment pause will negatively impact their lives, according to a new survey from the National Endowment for Financial Education, or NEFE.
With borrowers feeling anxious heading into October, most will have to make budgetary changes, according to Billy Hensley, NEFE’s president and CEO.
“One in four of all U.S. adults will be reducing their spending in other areas,” Hensley said, “and that’s a shift in consumer spending that could be felt across the entire economy.”
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Life Changes

Retirement security is a concern for many older Americans, and outliving savings is often their biggest fear.
But “retirement spending is not pass-fail,” said Justin Fitzpatrick, co-founder of Income Lab, a retirement planning software company.
You can use “risk-adjusted guardrails” to shift spending throughout retirement, depending on your goals.

Martin Barraud | Caiaimage | Getty Images

PHOENIX — Retirement security is a concern for many older Americans and outliving savings is often their biggest fear.
To that point, some 58% of savers and retirees worry about running out of money, according to recent research from Cerulli Associates.

But “retirement spending is not pass-fail,” said certified financial planner Justin Fitzpatrick, co-founder of Income Lab, a retirement planning software company.
Your retirement spending isn’t static, meaning there’s room for adjustments over time, depending on your needs and goals, he said, speaking at the Financial Planning Association’s annual conference on Wednesday.

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Here’s a look at other stories offering a financial angle on important lifetime milestones.

It’s “really disquieting” to go from working with a steady paycheck to retirement with income uncertainty, which can lead to paralysis, Fitzpatrick said. Here’s what retirees need to consider.

Total financial ruin is ‘almost impossible’

Financial advisors often rely on “probability of success” scores as clients approach retirement — based on a so-called Monte Carlo simulation which shows a range of possible outcomes.
However, Fitzpatrick sees retirement expenses as “a series of small liabilities,” and many of these costs can be flexible. For example, you may opt for the brewpub over a steakhouse or skip a vacation, he said.

“These are not necessarily the things you would prefer ahead of time, but they’re different from financial ruin,” Fitzpatrick said.
Total financial ruin is “almost impossible” because individual liabilities can be small and spending generally happens slowly enough to make “minor and temporary adjustments” over time, he said.

Leverage ‘risk-based guardrails’

Fitzpatrick suggests using “risk-based guardrails,” or predefined guidelines, to increase or decrease retirement spending. The strategy uses planning software and considers longevity, future cash flows and income changes, along with other factors.
“You find a spending level that is reasonable,” and when the risk of doing nothing gets too high, you need to start spending less, he said. However, this requires monitoring and updating the plan regularly.
“An advisor can be that spending GPS along the way and let you know when an adjustment makes sense,” Fitzpatrick added. More

A federal government shutdown will start Oct. 1 unless Congress passes spending legislation.
If the government shuts down, nonessential functions would cease.
Federal workers wouldn’t get paychecks, households may not receive some federal benefits and customer service for student loan borrowers and others may be delayed.
The potential impact will grow the longer a shutdown persists.

Bloomberg Creative | Bloomberg Creative Photos | Getty Images

What is a government shutdown?

During a shutdown, the federal government ceases operations that are deemed nonessential.
Every year Congress must pass legislation to fund the federal government for the coming fiscal year. A shutdown occurs if legislators can’t finish this appropriations process on time.

The government’s 2024 fiscal year starts on Oct. 1. If Congress is unable to pass the necessary spending bills — or a continuing resolution that offers stopgap funding — then a shutdown will commence on Sunday morning.

Speaker of the House Kevin McCarthy, R-Calif.
Win Mcnamee | Getty Images News | Getty Images

It’s poised to occur this year as hard-right conservatives in the Republican-controlled House are using a possible shutdown as leverage to force deep cuts in federal spending.
There have been 14 shutdowns since 1980, according to the Bipartisan Policy Center. The most recent was a partial shutdown in 2018-19; it was also the longest, lasting 34 days, according to the Congressional Research Service.
A shutdown affects “discretionary” spending. “Mandatory” spending, like Social Security and Medicare, is spared because it doesn’t require annual congressional approval.
Discretionary spending accounted for about 27% of the $6 trillion federal budget in fiscal year 2022, according to the Congressional Budget Office.

How would a shutdown hit your wallet?

Every shutdown is “unique,” which makes gauging its exact impact difficult, Sprick said.
Here’s how it’s likely to play out.
Among the most immediate and direct results: More than 2 million civilian federal employees will either be furloughed or keep working without pay until the shutdown resolves.
“Losing out on income for one, two or three pay periods can be the difference between paying rent or a mortgage,” Sprick said. “That can pose really significant household issues.”
Workers deemed nonessential would be furloughed, while those considered essential would keep working. It’s likely to be about a 50-50 split of employees, said Mark Zandi, chief economist of Moody’s Analytics.
In addition, military personnel on active duty — about 1.3 million people — would stay on the job without pay. Contractors hired by the federal government would also be at risk of not getting paid for services — and those businesses may start laying off or furloughing workers, Zandi said.

Millions may also lose certain federal benefits, with that threat increasing with the length of a shutdown, experts said.
For example, about 7 million people would likely see aid delayed from the Special Supplemental Nutrition Program for Women, Infants and Children program, according to the White House. Known as WIC, the program provides federal funds to low-income women, infants and children up to age 5 who are considered to be at nutritional risk.
Food assistance through the Supplemental Nutrition Assistance, or SNAP, program is “on better footing” than WICs, which would likely be affected within days of a shutdown, Sprick said. But SNAP benefits would also be at risk if a shutdown persists for a couple weeks, he said.
Section 8 housing vouchers, which are used by families with low incomes, seniors and people with disabilities, would also be at risk, Sprick said.
Some veterans benefits — such as disability compensation and transition assistance — might be delayed, as might certain loans for farmers.
Loans secured through the Small Business Administration might be delayed to business owners, Zandi said. Closing on a home that requires federal flood insurance would also likely be delayed, he said.

Loan servicing, taxes and travel to be affected

Customer service would be impaired across government functions due to reduced staff, experts said.
If past experiences are a guide, absenteeism may also become an issue among essential workers if the shutdown persists, since they wouldn’t be getting paychecks, they said.
Significantly, 90% of staff at the U.S. Department of Education may be furloughed just as federal student loan payments are poised to restart Oct. 1. Borrowers who call the Education Department with questions about their bills will have “a really tough time getting those answers,” Sprick said.

How long it lasts has a real impact on American households, to a greater extent than just if it happens or not.

Emerson Sprick
senior economic analyst at the Bipartisan Policy Center

Service snafus will vary by agency, depending on their respective contingency plans. For example, taxpayers might see delayed service at the IRS, as might people trying to get certain help from the Social Security Administration.
Travelers may also see plans disrupted. Personnel like air traffic controllers and Transportation Security Administration workers are generally considered essential but may not keep coming to work after a few weeks — making it painful to get through airport security lines, for example, Zandi said. That occurred during the last shutdown in 2018-19.
National parks and certain museums may also be closed or limit services, Zandi added.

Inflation and the U.S. economy

These disruptions can have a big impact on the U.S. economy over time.
For example, if the U.S. stops purchasing typical goods and services — things like computer equipment, paper clips, office furniture — less money is pumped into the economy. Federal employees who are forgoing pay may cut back their spending, too. Consumers more broadly might get anxious and cut back if they lose confidence, and investors may get jittery and stock market volatility may increase.
That may all coincide with other economic headwinds like the end of the student loan pause, the United Auto Workers strikes, and higher oil and gasoline prices, Zandi said.

“I think if it’s a two-, three-week shutdown it’s a nuisance for some but not a significant problem for most,” he said. “If it goes on for more than a month or longer, that may be a headwind that blows so hard it pushes the economy over.”
And everyone is affected by a recession, he said.  
Additionally, federal agencies that issue economic data — on inflation and the labor market, for example — won’t do so during a shutdown. The Federal Reserve relies on such data points as it weighs how to proceed with its interest rate policy — increasing the odds that the Fed makes a mistake, Zandi said. More

The number of Americans who say they are stretched thin has remained stubbornly high.
Federal Reserve Chair Jerome Powell said the central bank would like to see more progress in its fight against inflation, leaving open the possibility of one more interest rate increase this year.

After a prolonged period of high inflation and higher interest rates, Americans are just getting by.
As of August, 60% of adults said they are living paycheck to paycheck, according to a new LendingClub report, unchanged from last year.

Recent data is painting a mixed picture of where the economy stands. Inflation has shown some signs of cooling but the consumer price index, which measures costs across a broad array of goods and services, is still up 3.7% from a year ago, according to the U.S. Bureau of Labor Statistics’ August reading.
Those higher prices have weighed on worker paychecks. Real average hourly earnings declined 0.5% for the month, the U.S. Department of Labor said in a separate release.
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Since wage growth hasn’t been able to keep up, households are having a harder time making ends meet.
“The data underscores the pervasive nature of financial challenges affecting a majority of consumers,” said Alia Dudum, LendingClub’s money expert. “The problem is that there is more month at the end of the money.”

The Federal Reserve left interest rates unchanged at the end of its most recent policy meeting but Fed Chair Jerome Powell said the central bank would like to see more progress in its fight against inflation, leaving open the possibility of another interest rate increase this year.
Central bank officials have already raised rates 11 times, pushing the Fed’s key interest rate to a target range of 5.25% to 5.5%, the highest level in more than 22 years. 

Four out of five consumers’ spending habits have been affected by inflation, according to TD Bank’s annual consumer spending index.
Soaring housing, food and child-care costs are putting pressure on household budgets on top of paying higher interest rates on credit card debt and auto loan payments, said Sophia Bera Daigle, CEO and founder of Gen Y Planning, an Austin, Texas-based financial planning firm.
Monthly expenses are “starting to hurt,” said Bera Daigle, who is also a member of the CNBC’s Advisor Council.
Lower-income workers have been the hardest hit by higher prices, particularly for food and other necessities, since those expenses account for a bigger share of the budget, studies show.
Now, 76% of consumers earning less than $50,000 a year and 62% of those earning between $50,000 and $100,000 were living paycheck to paycheck in July, little changed from a year ago, LendingClub found. Of those earning $100,000 or more, only 45% reported living paycheck to paycheck. 

70% of Americans are stressed about finances More

A Trump-appointed federal judge in Texas upheld a Biden administration rule about using ESG funds in 401(k) plans and other retirement plans.
The judge, Matthew Kacsmaryk, wrote that the rule’s substance is similar to a Trump-era regulation that it replaced.
The Biden administration’s pro-ESG messaging is likely the more significant win, lawyers said.

President Joe Biden walks with Labor Secretary Marty Walsh before an event in the Rose Garden of the White House on Sept. 15, 2022.
Anna Moneymaker | Getty Images News | Getty Images

‘Tonal shift’ is the biggest win

ESG investing — also known as impact or sustainable investing — allocates money according to environmental, social and governance principles. Climate-focused mutual funds, for example, might seek to invest in green energy technology or avoid fossil fuel companies.
The Biden administration rule — which took effect Jan. 30 — was one facet of a White House effort to address climate change. President Biden also signed the Inflation Reduction Act into law, the biggest piece of climate legislation in U.S. history.
Biden’s ESG rule replaced a regulation issued by the Trump administration. The latter was expected to have a chilling effect on ESG uptake in 401(k) plans at a time when adoption was already relatively scarce.
Just 4.2% of 401(k) plans offered an ESG fund to workers in 2021, according to the Plan Sponsor Council of America, a trade group. They hold about a hundredth of 1% of 401(k) assets, PSCA said.

Republican state attorneys general sued the U.S. Department of Labor, which promulgated the rule, claiming it violated the Employee Retirement Income Security Act of 1974 and the Administrative Procedure Act.
A Trump-appointed federal judge in the Northern District of Texas dismissed that argument.
Of course, the decision may be appealed. For now, the ruling preserves the Biden administration’s positive vibes about ESG investing, experts said.
“In an area where perception is reality, I do think the tonal shift is a significant thing,” said Andrew Oringer, a retirement law expert and partner at The Wagner Law Group.
“If you’re a fiduciary who wants to take into account ESG, and you feel the Department of Labor isn’t against you, maybe you’re more willing to do it,” Oringer added. “Whereas if you’re a fiduciary who wants to take it into account and you feel the DOL is gunning for you, maybe you’re not as willing to proceed.”
(Fiduciary is a legal term that refers to the individuals choosing investment funds for a 401(k)-type plan.)

The laws are ‘substantially the same’

From a legal standpoint, the Biden and Trump rules are, at their core, “substantially the same,” said Mark Iwry, a non-resident senior fellow at the Brookings Institution and former deputy assistant secretary for retirement and health policy at the U.S. Department of the Treasury during the Obama administration.
In other words, reverting to the Trump-era regulation wouldn’t have had much of a legal impact.
The Texas judge, Matthew Kacsmaryk, agreed.
“The 2022 Rule changes little in substance from the 2020 Rule and other rulemakings,” he wrote in his Sept. 21 opinion, referring to the Biden and Trump-era ESG regulations, respectively.
That’s because ERISA, a federal retirement law, disallows employers from picking investments for ideological reasons. Instead, they must be chosen according to a financial or economic analysis of what’s best for the plan and its investors.

The Biden administration was concerned that the spin around the Trump rule might have chilled plans’ willingness to consider ESG factors.

nonresident senior fellow at the Brookings Institution

So, employers can consider ESG factors if they “reasonably determine” those factors materially affect the financial risk and return analysis of an investment, Iwry said.
And in the case of a “tie” — for example, a dead heat between a climate fund and one or more traditional funds — employers can weigh in favor of non-economic factors, such as ESG and employee preferences for such funds, experts said.
These have been longstanding views of the Labor Department, and consistent with both the Biden and Trump rules, experts said.
“There’s only so much you can diverge from what [ERISA] requires,” Oringer said.
So why promulgate a new rule in the first place? While there are subtle differences, the answer largely gets back to tone, experts said.
“The Biden administration was concerned that the spin around the Trump rule might have chilled plans’ willingness to consider ESG factors in evaluating plan investments,” Iwry said. “The new rule effectively declares, ‘There’s no chill in the air.'”

Roadblocks remain

Mischa Keijser | Image Source | Getty Images

ESG funds have gained popularity more broadly among retail investors. U.S. ESG funds held $286 billion in 2022, about triple the total from 2018, according to Morningstar.
But some roadblocks remain for 401(k) uptake, experts said.
For one, 401(k) investors have filed a flurry of class-action lawsuits in recent years against employers over their investment options. Employers may be nervous about adding ESG funds in such an environment, experts said.
Most immediately, the Trump-era ESG rule “spooked” the community and “I think that spooking still persists,” Oringer said.
They may also be cautious about proceeding with ESG because of the possibility of another tonal shift from the Labor Department in future Democratic and Republican administrations, Oringer said.
“We certainly don’t have — and may never have — a settling in of that pendulum,” he said. More

The U.S. federal government could shut down at around the same time student loan payments restart.
A shutdown could lead to 90% of staff at the U.S. Department of Education being furloughed, according to higher education expert Mark Kantrowitz.
Here’s what borrowers should know.

A sign declares the National Archive is closed due to a partial federal government shutdown in Washington, December 22, 2018.
Joshua Roberts | Reuters

Two big events could soon coincide: The U.S. federal government is poised to shut down just as student loan bills restart after a pause of more than three years.
With lawmakers thus far unable to strike a deal to keep the government funded beyond this week, the White House is warning federal agencies to prepare for a shutdown. If Congress is unable to pass funding legislation, the closure of agencies could occur starting Oct. 1, just when the Biden administration planned to switch on student loan payments for around 40 million Americans.

“But don’t celebrate just yet,” higher education expert Mark Kantrowitz advised borrowers who may be hoping the drama buys them more time before they have to pay their bill. “Student loan payments are still due.”
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The length of a possible shutdown will determine the impacts on borrowers, White House Press Secretary Karine Jean-Pierre said during a press briefing on Monday.
“If Republicans in Congress go down this road of shutting down the government, we anticipate that key activities at Federal Student Aid will continue for a couple of weeks,” Jean-Pierre said. “However, if it is a prolonged shutdown [it] could substantially disrupt the return to repayment effort.”
Here’s what borrowers need to know.

90% of Education Department staff could be furloughed

A government shutdown could lead to 90% of staff at the U.S. Department of Education being furloughed, Kantrowitz said. The term “furloughed” derives from the Dutch word, “verlof,” and means “leave of absence.” It is mostly associated with government shutdowns.
The department employed close to 4,100 employees, including part-time and full-time workers, as of September 2021.
But even with the lights mostly off at the Education Department, the student lending machine should keep chugging along.

“There should be minimal disruption of student loans, since the process is mostly managed by student loan servicers and other contractors,” Kantrowitz said.
In other words, your student loan servicer can handle the collecting and processing of your payment each month without help from the Education Department.
Because most federal student loans are paid for with mandatary funding, new borrowers also shouldn’t face any disruptions if there’s a government shutdown. It’s discretionary funding that Congress decides on each year and would be impacted by a shutdown.

Some borrowers could see delays

There are some borrowers who could be impacted by the stalemate in Washington. That’s because certain processes require loan servicers to consult the Education Department.
For example, the department is required to confirm eligibility for borrowers pursuing Public Service Loan Forgiveness aid. That federal program allows workers for the government or certain nonprofits to get their student debt canceled after 10 years.
During a shutdown, borrowers could run into delays trying to apply for their final loan forgiveness.

Meanwhile, borrowers hoping to make changes to their loans, such as consolidating them, may also hit a wall.
Those hoping to get information on their loans or the restart of repayment may be stuck waiting for answers if staff at the Federal Student Aid Information Center need to consult the Education Department, Kantrowitz added.
Still, borrowers should be able to get most of the information they need from their loan servicer and on studentaid.gov.
Borrowers should also be able to change their repayment plan and certify their current income under income-driven repayment plans without any bumps. More