Thursday, January 5, 2017

Byron Wien Announces Ten Surprises for 2017 (with six also-rans)

From Blackstone, Press Release Jan. 3:
New York, NY, January 3, 2017.
Byron R. Wien, Vice Chairman of Multi-Asset Investing at Blackstone, today issued his list of Ten Surprises for 2017. This is the 32nd year Byron has given his views on a number of economic, financial market and political surprises for the coming year. Byron defines a “surprise” as 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.

Byron started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. Byron joined Blackstone in September 2009 as a senior advisor to both the firm and its clients in analyzing economic, political, market and social trends.

Byron’s Ten Surprises for 2017 are as follows:
  1. Still brooding about his loss of the popular vote, Donald Trump vows to win over those who oppose him by 2020.  He moves away from his more extreme positions on virtually all issues to the dismay of some right wing loyalists.  He insists, “The voters elected me, not some ideology.”  His unilateral actions throw policy staffers throughout the government into turmoil.  Virtually all of the treaties and agreements he vowed to tear up on his first day in office are modified, not trashed.  His wastebasket remains empty.
  2. The combination of tax cuts on corporations and individuals, more constructive trade agreements, dismantling regulation of financial and energy companies, and infrastructure tax incentives pushes the 2017 real growth rate above 3% for the U.S. economy.  Productivity improves for the first time since 2014.
  3. The Standard & Poor’s 500 operating earnings are $130 in 2017 and the index rises to 2500 as investors become convinced the U.S. economy is back on a long-term growth path.  Fears about a ballooning budget deficit are kept in the background.  Will dynamic scoring reducing the budget deficit actually kick in?
  4. Macro investors make a killing on currency fluctuations.  The Japanese yen goes to 130 against the dollar, stimulating exports there.  As Brexit moves closer, the British pound declines to 1.10 against the dollar, causing a surge in tourism and speculation in real estate.  The euro drops below par against the dollar.
  5. Increased economic growth, inflation moving toward 3%, and renewed demand for capital push interest rates higher across the board.  The 10-year U.S. Treasury yield approaches 4%.
  6. Populism spreads over Europe affecting the elections in France and Germany.  Angela Merkel loses the vote in October.  Across Europe the electorate questions the usefulness of the European Union and, by the end of the year, plans are actively discussed to close it down, abandon the euro and return to their national currencies....