Investing legend known for his annual predictions says the world could be in for a big surprise — in a good way – MarketWatch

Byron Wien


Blackstone’s BX, -3.49% Byron Wien has been offering up his list of potential surprises for decades now. As with even the most prescient of Wall Street pundits, he’s got plenty of misfires to go along with his hits, but CNBC’s Jim Cramer once said, “you can make a fortune” from Wien’s work.

So, in that spirit, what’s his latest take on the market?

Well, back in January, Wien was bearish on electric cars, bullish on the economy and predicted that volatility VIX, +2.30% would ultimately slam the markets. Now, with his batch of calls yielding mixed results, Wien offered up a taste of what he sees in the coming months.

‘A big surprise on a global level is if there were more harmony between China and the West. The hostility between the two largest economies in the world is not good for the markets. So if there would be some reconciliation or some rapprochement between the U.S. and China that would restore normal relations, it would be interpreted favorably by the financial markets. That’s unlikely in a Trump presidency. It’s more likely, but not certain, in a Biden presidency.’

That’s how Wien responded when asked his thoughts looking forward in an interview published over the long weekend. While thawing relations between China and the U.S. might eventually provide a boost to markets, for now, it’s rough going out there.

“There’s a lot of speculation going on. That’s probably not a healthy thing,” he said, adding that he sees the economy rebounding more slowly than most expect. “The market is vulnerable.”

Wien said the common train of thought is that the economy isn’t doing as well as the financial markets, but he doesn’t see it that way.

“There really isn’t a disconnect,” he said. “Individual investors are propelling the market to new highs, and they are doing it by pushing up the prices of the internet related stocks, the stocks that are benefiting from people working at home. “

Wien also threw water on the comparisons between today and the dot-com bubble, saying he believes every market cycle to be different.

“In the late nineties, the dot-com bubble was fueled by a real breakthrough in technology, the advent of the internet. It was changing people’s lives, and that was a positive change. It just got carried to excess,” he said. “Today, this is a different thing. It’s a negative surprise: A virus that is going to change the way we live, and it’s difficult to assess the long-term implications of it.”

Wien said, from his perspective, that stocks are overpriced, but not as “outrageously” as they were back then. Hence, he doesn’t see an imminent bear market.

As for the economy, the healing could take a while, and, according to Wien, it depends on an effective vaccine, which may or may not arrive by the end of the year — a time frame that he believes the stock market is already pricing in.

“That’s a realistic assumption,” he said. “But I don’t think that people like me will get it until the end of next year. So a return to normal is a 2022 phenomenon. At best, the economy is a quarter or one third of the way back to normal.”

What’s an investors to do in the meantime?

“There is a good part of the market that’s underpriced,” he said. “Airlines, transportation and hospitality have performed poorly, and some represent good value for patient investors who can tolerate the risk as a part of their portfolio.”

Patience was needed Tuesday, as the Dow Jones Industrial Average DJIA, -2.24%, Nasdaq Composite COMP, -4.11% and S&P 500 SPX, -2.77% were all firmly in negative territory.

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