Wien Predicts Economic Turnaround In '12

Jan 5 2012 | 1:48pm ET

It wouldn't be the first week of the new year on Wall Street without Byron Wien's annual list of 10 "surprises" for the coming 12 months, and the Blackstone Group chief strategist did not disappoint.

Despite only a 50% success rate last year, Wien remained as optimistic in his 2012 bets as he did for 2011. Of course, Wien acknowledges that each of his predictions has only, in his mind, a better than 50% chance of happening.

Wien predicted that U.S. corporate earnings will continue to rise this year, pushing the Standard & Poor's 500 Index above 1,400—100 points lower than he (incorrectly) predicted it would end last year. With the U.S. economy growing at better than a 3% rate and unemployment dipping below 8%, fears of a renewed recession recede.

That's all good news for President Barack Obama. Wien doesn't come out and say that Obama will beat his predicted Republican nominee, former Massachusetts Gov. Mitt Romney, but says that the improving economic picture will help him "convince voters that he didn't do such a bad job in his first term after all," and that Romney will be "viewed as uninspired and whose positions on many issues are unclear." More good news for the president: Democrats will overturn 2010's electoral verdict and retake the House of Representatives. Unfortunately for him, an anti-incumbent wave will cost his party it's razor-slim majority in the Senate.

Even before the voters throw the bums out, however, Wien says those bums will get their acts together, to some extent. "Congress decides its dysfunctionality is harmful to both parties and acts before the November election to deal with the failure of the Super Committee to develop a program to reduce the U.S. budget deficit by $1.2 trillion over 10 years." As part of that deal, Obama will allow some of the tax cuts installed by his predecessor to continue, Wien predicts.

It won't only be the U.S. getting its act together: European leaders will "finally" develop "a brad plan to deal with its sovereign debt problem." Wien predicts that, in spite of the U.K.'s much-ballyhooed and much-ignored veto this year, Europe's main institutions and the International Monetary Fund will "band together to keep all the countries within the union and to continue the euro as the continent's currency." Emerging market economies will finally have a good year, with Chinese, Indian and Brazilian stock indices soaring as much as 20%. And the Arab Spring will continue and mature, achieving regime change in Syria.

Wien also predicts that oil prices will drop to $85 a barrel as extraction of oil and gas from shale and rock makes the U.S. and others less dependent on the Middle East.

Not all of Wien's predictions are positive. The former Pequot Capital Management and Morgan Stanley strategist predicts that Eastern European and Asian hackers will achieve temporary bank closures. In addition, there will be concern about rapid money supply growth in the developed world, leading investors to gorge on "the currencies of countries that seem to be managing their economies sensibly," including Australia, Korea, the Scandinavian countries and Singapore.

Wien appended four also-rans to his list, either because they weren't as important as his top 10 or have less than a 50% likelihood of happening. He predicts that the housing market will turn around, gold will soar to $1,800, municipal bond yields will fall and the 10-year U.S. Treasury note will rise as China cuts back on its bond purchases.

In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...


FINalternatives Trending

From the current issue of