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Economic disappointment, no phase-2 deal, and the Boeing 737 Max's return to service: Here are Byron Wien's 10 surprises for 2020
Economic disappointment, no phase-2 deal, and the Boeing 737 Max's return to service: Here are Byron Wien's 10 surprises for 2020
Carmen ReinickeJan 7, 2020, 22:28 IST
Byron Wien, Blackstone's vice chairman, released his "Ten Surprises for 2020" list on Monday. Joe Zidle, chief investment strategist in the Private Wealth Solutions group at Blackstone, assisted in creating the list.
Wien has released the annual list of his views on economic, financial market, and political surprises that he sees as "probable" in the year ahead since 1986.
Here are Wien and Zidle's "Ten Surprises for 2020."
For 2020, Blackstone Vice Chairman Byron Wien has a number of surprising predictions, including an S&P 500 rally above 3,500, a return to service for the beleaguered Boeing 737 Max and the nonappearance of a phase-two deal between the US and China.
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These predictions are a part of Wien's annual "Ten Surprises" list. For 35 years, Wien has released a list of his views on economic, financial market, and political surprises that he sees as "probable" in the year ahead.
On Monday, Wien released his list for 2020 along with Joe Zidle, the chief investment strategist in the Private Wealth Solutions group at Blackstone. Zidle joined Wien in creating the list in 2018.
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,'" according to the Monday report. That means that Wien thinks the chance of the event happening is 50%.
The "Ten Surprises" list was started by Wien in 1986 when he was the chief US investment strategist at Morgan Stanley, according to the report. He continued the tradition even when he joined Blackstone in 2009 as a senior adviser.
1. The economy disappoints the consensus forecast, but a recession is avoided.
"Federal Reserve Chair Powell lowers the Fed funds rate to 1%," Wien wrote Monday.
He continued: "Without a comprehensive trade deal in hand, President Trump exercises every executive authority he has to stimulate growth and ward off recession. He cuts payroll taxes to put more money in the hands of consumers."
2. Inequality and climate change become important election themes, but centrist ideas prevail.
"The House of Representatives sends articles of impeachment to the Senate, but Donald Trump is not convicted or removed from office," Wien wrote Monday.
He continued: "Enough information is revealed in the proceedings to cause some of his supporters, as well as many independents, to throw their support to liberal candidates in 2020 state races. The Democrats take the Senate in November."
3. There is no comprehensive phase-two trade deal that limits China's ability to acquire intellectual property.
"National interests result in the Balkanization of technology.T he development of separate standards for 5G and other tech hardware proves to be bad news for the future of world economies," Wien wrote.
He continued: "The move toward "decoupling" gains traction in negotiations with China. US economic co-dependence with China erodes. Both China and the US keep their hands off Hong Kong and let the protest settle down by itself."
4. The prospect of a self-driving car is pushed further into the future.
"A series of accidents with experimental vehicles causes a major manufacturer or technology company to issue a statement that it is no longer developing self-driving technology," Wien wrote Monday.
5. Emboldened by the pain of economic sanctions, Iran takes advantage of America's unwillingness to intervene and steps up acts of hostility against Israel and Saudi Arabia.
"The Strait of Hormuz is closed and the price of oil (West Texas Intermediate) soars to over $70/barrel," Wien wrote.
6. Even though some observers believe valuations are stretched, a surge in investor enthusiasm pushes the Standard & Poor's 500 above 3500 at some point during the year.
"Earnings increase only 5%, and S&P 500 multiples remain elevated because monetary policy is easy and investors become more comfortable that intermediate interest rates will rise slowly," Wien wrote.
He continued: "Volatility increases and there are several market corrections greater than 5% throughout the year."
7. Big tech companies face growing political scrutiny and social blowback.
"Once the market leaders, certain FAANG stocks underperform and the equal-weighted S&P 500 outperforms. A proposal to break up the largest social media platforms and increase regulation and government oversight gains popularity," Wien wrote.
He continued: "This has greater success than prior government efforts against Apple, Microsoft and IBM, because it has widespread support from the American people. A millennial in New York City puts a phone down and makes eye contact with another human and finds it non-threatening and refreshing."
8. Having secured a workable Brexit deal, the United Kingdom turns out to be the winner in its divorce from the European Union.
"The equity market rises and the pound rallies," Wien wrote.
He continued: "The UK benefits from a long transition period, and growth exceeds 2% as foreign direct investment resumes now that the outlook is clarified. The EU economy remains soft, and European markets other than the UK underperform the US and Asia."
9. The bond bubble starts to leak, but negative rates continue abroad.
"Even though the US economy is slowing, the 10-year Treasury yield approaches 2.5% and the yield curve steepens," Wien wrote.
He continued: "Japan and China pull away from the Treasury auctions. Rather than economic fundamentals or inflation, supply and demand drive yields higher."
10. The problems with Boeing's 737 Max are fixed and deliveries begin.
"The plane becomes a mainstay around the world, enabling airlines to operate more efficiently and increase profits. The stocks become market leaders," Wien wrote.
