By Lu Wang - Jan 4, 2012 4:16 AM GMT+0700
Blackstone Group LP (BX)’s Byron Wien, whose prediction for the U.S. economy and stock market in 2011 proved too optimistic, said oil will slip to $85 a barrel this year and the Standard & Poor’s 500 Index will exceed 1,400.
U.S. economic growth will top 3 percent while the nation’s unemployment rate will drop below 8 percent, Wien, chairman of Blackstone’s advisory services unit, said in his annual “10 Surprises” list published since 1986. Stock indexes in China, India and Brazil will rally at least 15 percent, he said.
“The drop in the price of oil and the rise in the stock market improve both consumer confidence and spending patterns,” Wien wrote in an e-mailed statement today. “Recession fears and even ‘the new normal’ view of prolonged slow growth are called into question.”
Wien said in January 2011 that U.S. economic growth and 10- year Treasury yields would approach 5 percent in the ensuing 12 months, while the S&P 500 would rise toward 1,500. Gross domestic product expanded 1.8 percent last year, according to the median economist projection, rates on the 10-year securities peaked at 3.77 percent and the stock index’s high point was 1,363.61. Wien was correct in predicting a drop in the U.S. unemployment rate and a surge in gold and oil prices.
On Target
The former senior strategist for Morgan Stanley said a year ago that the nation’s unemployment rate (USURTOT) would drop below 9 percent, which happened in November. He forecast gold would surge above $1,600 an ounce and the price of oil would climb to $115 a barrel. The precious metal rose to a record $1,923.70 an ounce while crude futures advanced to $114.83 a barrel.
Wien says his list is made up of events that investors assign 1-in-3 odds of happening but that he says are more than 50 percent likely to occur.
His 2012 prediction for crude oil implies a 14 percent slump from last year’s closing level, while the S&P 500 forecast would require an 11 percent gain. The benchmark index jumped 1.6 percent to 1,277.06 today.
Strategists at securities firms are more conservative on U.S. stocks. The S&P 500 will climb 6.4 percent to 1,338 this year, according to the average forecast of 13 strategists tracked by Bloomberg.
In 2009, Wien, who was then chief investment strategist for Pequot Capital Management Inc., predicted rallies in equities, gold and oil. From 2005 to 2009, he worked at Pequot, which closed in 2009 amid an insider trading probe by the U.S. Securities and Exchange Commission.
Low valuations will boost stocks in developing countries, Wien said. The 21-country MSCI Emerging Markets Index (MXEF) tumbled 20 percent last year as growth slowed from China to Brazil. The decline pushed the index’s price-earnings ratio to 10.8, cheaper than 83 percent of the time since 1995, according to data compiled by Bloomberg.
“The emerging markets finally have a good year,” Wien said. “Growth slows somewhat but favorable valuations enable China, India and Brazil indexes to appreciate.”
President Barack Obama will run against Republican Mitt Romney in this year’s election with Democrats winning the House and losing the Senate, Wien said. Europe will develop a “broad plan” to solve the sovereign-debt crisis, avoiding a bank meltdown, he said.
Wien gave four extra forecasts, including predictions that gold futures will rise to $1,800 an ounce and that 10-year Treasury yields, which ended 2011 at 1.88 percent, will climb to 4 percent.
Full list of Wien’s surprises, which he defines as events
investors assign 1-in-3 odds of happening but that he says are
more than 50 percent likely to occur in 2012:
1.) Crude oil falls to $85 a barrel.
2.) S&P 500 exceeds 1,400.
3.) U.S. real GDP growth exceeds 3%, unemployment rate drops
below 8%.
4.) Barack Obama runs against Mitt Romney for president,
Democrats win House, lose Senate.
5.) Europe develops a broad plan to solve the sovereign-debt
crisis. Greece and Italy restructure their debt. Spain and
Ireland strengthen their finances. A bank meltdown is avoided.
European economy contracts.
6.) Computer hackers attack major financial institutions.
7.) Investors buy currencies of countries “that seem to be
managing their economies sensibly,” such as nations in
Scandinavia, Australia, Singapore and Korea.
8.) Congress reduces the U.S. debt by $1.2 trillion over 10
years, with cuts to defense, Medicare and agricultural subsidies
as well as some tax deductions.
9.) Syrian President Bashar al-Assad is ousted.
10.) Stock indexes in China, India and Brazil surge 15%-20%
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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