Byron Wien's Reveals Top 10 Predictions: Expects Stocks To Decline After Predicting 15% Rise In 2015
Each year for the past three decades Blackstone's Vice Chairman of Multi-Asset Investing Byron R. Wien presents his top 10 "surprises" for the upcoming 12 months.
What constitutes a "surprise", you ask? A surprise is "an event that the average investor would only assign a one out of three chance of taking place but which Byron believes is 'probable,' having a better than 50% likelihood of happening." Last year's list included a few predictions that didn't exactly pan out including:
- The year-end 2014 rally in United States equities continues as the market rises for a strong performance in 2015
- The year-end 2014 meltdown in the high yield market, as a result of the collapse in the price of oil, creates a huge buying opportunity.
- Brazil provides an emerging market favorable surprise.
- Hillary Clinton decides not to run for President
Byron’s Ten Surprises for 2016 are as follows:
1. Riding on the coattails of Hillary Clinton, the winner of the presidential race against Ted Cruz, the Democrats gain control of the Senate in November. The extreme positions of the Republican presidential candidate on key issues are cited as factors contributing to this outcome. Turnout is below expectations for both political parties.
2. The United States equity market has a down year. Stocks suffer from weak earnings, margin pressure (higher wages and no pricing power) and a price- earnings ratio contraction. Investors keeping large cash balances because of global instability is another reason for the disappointing performance.
3. After the December rate increase, the Federal Reserve raises short-term interest rates by 25 basis points only once during 2016 in spite of having indicated on December 16 that they would do more. A weak economy, poor corporate performance and struggling emerging markets are behind the cautious policy. Reversing course and actually reducing rates is actively considered later in the year. Real gross domestic product in the U.S. is below 2% for 2016.
4. The weak American economy and the soft equity market cause overseas investors to reduce their holdings of American stocks. An uncertain policy agenda as a result of a heated presidential campaign further confuses the outlook. The dollar declines to 1.20 against the euro.
5. China barely avoids a hard landing and its soft economy fails to produce enough new jobs to satisfy its young people. Chinese banks get in trouble because of non-performing loans. Debt to GDP is now 250%. Growth drops below 5% even though retail and auto sales are good and industrial production is up. The yuan is adjusted to seven against the dollar to stimulate exports.
6. The refugee crisis proves divisive for the European Union and breaking it up is again on the table. The political shift toward the nationalist policies of the extreme right is behind the change in mood. No decision is made, but the long-term outlook for the euro and its supporters darkens.
7. Oil languishes in the $30s. Slow growth around the world is the major factor, but additional production from Iran and the unwillingness of Saudi Arabia to limit shipments also play a role. Diminished exploration and development may result in higher prices at some point, but supply/demand strains do not appear in 2016.
8. High-end residential real estate in New York and London has a sharp downturn. Russian and Chinese buyers disappear from the market in both places. Low oil prices cause caution among Middle East buyers. Many expensive condominiums remain unsold, putting developers under financial stress.
9. The soft U.S. economy and the weakness in the equity market keep the yield on the 10-year U.S. Treasury below 2.5%. Investors continue to show a preference for bonds as a safe haven.
10. Burdened by heavy debt and weak demand, global growth falls to 2%. Softer GNP in the United States as well as China and other emerging markets is behind the weaker than expected performance.
Added Mr. Wien, “Every year there are always a few Surprises that do not make the Ten either because I do not think they are as relevant as those on the basic list or I am not comfortable with the idea that they are ‘probable.’”
Also rans:
11. As a result of enhanced security efforts, terrorist groups associated with ISIS and al Qaeda do NOT mount a major strike involving 100 or more casualties against targets in the U.S. or Europe in 2016. Even so, the United States accepts only a very limited number of asylum seekers from the Middle East during the year.
12. Japan pulls out of its 2015 second half recession as Abenomics starts working. The economy grows 1%, but the yen weakens further to 130 to the dollar. The Nikkei rallies to 22,000.
13. Investors get tough on financial engineering. They realize that share buybacks, mergers and acquisitions, and inversions may give a boost to earnings per share in the short term, but they would rather see investment in capital equipment and research that would improve long-term growth. Multiples suffer.
14. 2016 turns out to be the year of breakthroughs in pharmaceuticals. Several new drugs are approved to treat cancer, heart disease, diabetes, Parkinson’s and memory loss. The cost of developing the breakthrough drugs and their efficacy encourage the political candidates to soften their criticism of pill pricing. Life expectancy will continue to increase, resulting in financial pressure on entitlement programs.
15. Commodity prices stabilize as agricultural and industrial material manufacturers cut production. Emerging market economies come out of their recessions and their equity markets astonish everyone by becoming positive performers in 2016.
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Byron is, definitely, the smartest guy… in his mother’s cluttered basement. ;-)
Looney
For some reason I seem to think that this guy (Who has been making annual predictions since the turn of the 14th century when he was wearing a black hooded cloak and crow's beak leather mask ... and I remember sitting in Big Important Meetings to listen... we bond guys would groan inwardly) has not been too stellar with his crystal meth ... er I mean ... ball.
Whatever
He uses a magic 8 ball..
He must be because Japan will not recover in 2016. Japan will not recover until their population starts reproducing and they start growing in stead of aging and dying.
No, Japan won't recover until it defaults. Folks don't seem to realise how much debt Japan has printed. Should Old Yeller raise rates over 1%, expect Japan to sink into the Pacific.
That a boy Byron. You only missed by over 15% last year but everyone's going to listen to you this year cause you are just soooo wise.
And he's got a Wien Bridge to sell you.
(Even Spock raised an eyebrow and looked impressed).
You may replace the R values with Z values, to denote Impedance. (With pun on Z-Impedance). Too specialized or high brow? Sorry.
Yikes! I'm an electrical engineer and even I think that one was stretched.
Japan pulls out of its 2015 second half recession as Abenomics starts working.
Um. No.
Zactly! ;-)
Looney
Byron’s list is not bad. Find myself agreeing with most. I give it an 8.
Hey ! It's the dude from Princess Bride who loses the poison-in-the-cup game to Westley, the farm boy !
Inconceivable! (I don't think Abenomics means what he thinks it means)
another year of dodging the "poison in the shower" game for Wien, not many more
I give it a perrrfect 10! I love all predictions, I don't care if they are right or wrong!
Agree. We all do in some level. But few have the ability to articulate. Also, it takes some research that few have the time for it.
That jackass has never been right about anything, ever.
Your statement is not quite correct for 2014: Byron got 4/10 in 2014.
http://www.businessinsider.com/byron-wien-2014-surprises-scorecard-2014-12#final-score-11
2013: 2.9/10.0: http://www.businessinsider.com.au/byron-wiens-10-surprises-for-2013-2013-12#better-luck-next-year-11
But correct for 2010: 0/10 http://www.zerohedge.com/article/byron-wiens-prediction-track-record-zero-out-ten
Anyway, his ten, not the fifteen, are doable. But Ted Cruz and not Rubio came as a surprise. But if Hillary runs against Trump, I can see the Senate Democrat.
Ooh ok then he's going full returd then and will be completely 180 degrees wrong.
Abenomics the defibrillator that has brought the Japanese economy back to life 10 times, forgetting however that the patient has terminal cancer.
I blew coffee out my nose on #12. Abenomics starts working, now thats rich.
My first thought was, define "work."
whaaa whaaa whaaaaaaaaa... let's see how wrong Weiney will be!
Better luck next year Byron.
He's confusing predictions with his Wish List.
BW needs to call it a career and go off to play golf and sleep. I tracked his predictions one year back around 2009-2010 and they turned out to be about 80% wrong.
In 1450 he predicted that Gutenberg would not invent the printing press.
I thought that one was, "The bible will only be printed in Latin. And never a beastly language like German."
Changing money in the temple or practicing your religion in governement bank/treasury should be punishable by death and enforced often. The story of Jesus is starting to make all kinds of sense now.
"No pricing power" is easy to see. But "higher wages"? And how are "higher wages" possible in this economy...?
Fedgov jobs?
Would be interesting to correlate .gov wage growth versus overall tax increases. I forecast a positive collelation of >0.65.
Balderdash I say, pure balderdash.
CNBC busy this afternoon screaming WELL OFF THE LOWS! WELL OFF THE LOWS!
It's always been BTFD.
On auto-pilot now with a lot of people.
This guy must get together with Jeremy Siegel. Always bullish.
Byron also predicted a 2014 end-of-year bounce in Obamacare popularity. Tip of the hat to him for making predictions, but dayum, he's off on some of these . . . by a country mile. The Wien-er is carrying water for the Lying Left and the 'globofascistas'.
Going by the TV commercials I see, it sure is popular with insurance companies.
anything about a crowd with pitchforks, torches etc....dragging his work colleagues into the street for a good old guillotining? Hillary wins the presidency would be the end of the world as we know it
If Cruz somehow wins the nomination, I've no doubt that Trump will run as an independent, with Cruz and Hillary splitting the anti-trump vote.
I'mma need more popcorn.
I didn't know Wally Shawn was a stock guy.
Inconceivable!
He is just making his small contribution to the lamestream media's primary financial meme for the coming year, ie, talking his book. Whenever these 'smartest guys in the room' start predicting, you can be sure that his trading desk is taking the other side. Tylers, you should start a 'not Wien' Fund, to take the other side, similar to certain prior known muppeteers, who specialized in being wrong for their clients. However, in Wien's case, first you will note that he only predicts the obvious, and second, that it may be hard to take the other side in many of these bets. Although Bass has already taken the other side of his energy bet...
How about a prediction of putting Clintons, Obamas and Bushes...throw in Soros, Buffet, Sanders and Gore on a boat with no motor to float aimlessly around the world's oceans with no food to see who would survive. We could launch a boat each week with a different mega financial firms top people....and fly a drone over every couple of days to see who "Survives"....definitely would be a top show....Goldman Survivor!
But be prepared for a Hitlery wearing a bikini made from palm leaves and coconut shells.
"That ain't no Ginger, Gilligan!"
"Skipperrrrr! Professsorrr!! Saggy ChinTitttsss!!!"
Uh huh huh huh huh huh
Ween
Fuck this guy.
I'm fucking sick and tired of this bullshit. Republicans loose the congress because of "extreme" views? Hey byron, guess you're a smart guy, in my life I've seen my unwavering views go from being overwhelmingly mainstream to being considered "extreme". Now, you're smart, so, you must therefore conclude that things change and if you examine the nature of change vis-a-vi the human experience a little more you might happen upon the pendulum effect. Hence what is "mainstream" today, like your buttfucking pedophilic friends (you ugly fucktard), will just as easily go back to being extreme. You see, if there are certain people out there that are beyond reason who are at war with you and tell you in plain English they intend to kill you and seek all out eradication, suggesting a policy to prevent those people from coming to get you versus a policy of literally opening the door for them IS NOT FUCKING EXTREME! YOU SMUG, CLOISTERED FUCKING ELITE SHITBAG! Nor is it, byron, to believe that the human species is sexual dimorphic, comprised of males and females not "gender" fluids and drag queens. In fact, I can take your smart ass down to a lab, you know those scientific places, and prove to you with zero doubt that this male/female thing is a F A C T - fact! The Republican candidates, Trump, Cruz and Carson are all one thing to you - anti establishment and that is all you need to call them "extreme", meanwhile, the "establishment", of which you have profited handsomely by being a professional fortune teller, says that a 50 year old man who leaves his family and insists that he's not only a woman but a 6 year old girl, because, little girls have no responsibility is not only legit but a person worthy of honor, accolades, praise and even emulation. Versus, Trump, who literally tells the truth. You sir, are why we are in BIG trouble, when you start saying that people who speak the truth are "extreme"! Fuck you. Please make your way to Oregon and put yourself in between the Militias and the feds...cross fire is healthy.
It's pretty obvious Trump goes against Hillary and wins. That is unless the ruling class sends out one of their hired killers against him.