Private equity (PE) stocks tumbled after Trump’s “Liberation Day” tariff blitz, with names like KKR (KKR), Apollo (APO), and Carlyle (CG) sinking hard as the market priced in the fallout. Investors are now questioning whether higher rates, weaker growth, and rising costs will upend the PE model—and fast.
PE Stocks Slide as Firms Brace for Higher Rates
Shares of top U.S. private equity firms dropped sharply in after-hours trading on Tuesday. KKR sank 6.4%, Apollo fell 6%, and Carlyle lost 5.4%, according to Barron’s. Blackstone (BX), Blue Owl (OWL), and Ares (ARES) weren’t far behind. The market’s message? Tariffs could keep interest rates higher for longer—and that’s bad news for leveraged buyouts.
The bigger problem? Dealmakers rely on cheap debt. But with inflation risks now climbing again, the Fed may hit pause on its expected rate cuts. Two cuts had been penciled in for 2025. That path just got murkier. Higher borrowing costs make it harder to fund deals—or exit them cleanly.
Tariffs Target Imports That Hit Portfolios Directly
This isn’t just a macro scare. The specifics sting too. Trump’s new 54% tariff on Chinese goods is particularly painful for portfolio companies tied to manufacturing and consumer goods—two sectors often owned by PE firms and deeply reliant on imported components, according to The Times.
That’s a problem. Rising costs can’t always be passed to consumers. Supply chains don’t realign overnight. And many of these businesses are already operating on thin margins. As PwC pointed out, deal IRRs shrink fast when input costs jump unexpectedly.
Private Equity Faces Hard Choices in Tougher Economy
The backdrop is messy. Inflation is sticky. Growth is wobbly. And U.S. Fiscal tightening is limiting room to maneuver. According to TD Cowen, Apollo still sees “a path to fundamental outperformance” thanks to its private credit arm, but even that comes with risks.
In this environment, PE firms may need to shift from fast exits to defensive plays. Smaller deals, longer holds, more credit. The era of easy arbitrage and cheap leverage? It’s getting priced out.
Investors can use the TipRanks Stock Comparison tool to evaluate key metrics across private equity firms—like valuation, analyst ratings, and dividend yield—making it easier to spot relative strengths and weaknesses before making a move.
