Legendary investor, prognosticator and Blackstone Vice Chair Byron Wien, along with Joe Zidle, released their “Ten Surprises for 2020,” which include no phase two trade deal for the U.S. and China, two more interest rate cuts, Democrats taking control of the Senate and new S&P 500 records despite volatility.
The 50-year stock market veteran’s “Ten Surprises” list is a must-read for investors and anyone on Wall Street, and Wien has published it since the mid-80s when he was the chief investment strategist at Morgan Stanley.
Among other highlights, Wien thinks a recession will barely be staved off by the Fed, tech stocks will underperform the broader market after a banner 2019, Boeing will battle back after the 737 Max crisis, Brexit will finally come to fruition, and rising tensions in the Middle East (sort of a no-brainer there considering what’s going on with Iran).
The list is now compiled by both Wien and Zidle, Blackstone’s Chief Investment Strategist, and they view the events as “probable,” meaning a better than 50% chance of coming to fruition.
Blackstone is one of the top investment firms in the world with $554 billion in assets under management.
Wien and Zidle’s Top 10 Surprises for 2020
- The economy sinks but a recession is avoided. Fed Chair Jerome Powell cuts rates twice, down to 1%, and President Donald Trump pulls out all the stops without a comprehensive trade deal with China to stimulate growth and avoid recession. Trump cuts payroll taxes to put more money in the hands of consumers to spur growth.
- Wealth inequality and climate change dominate election themes but moderate ideals prevail. The House sends articles of impeachment to the Senate, where Trump is acquitted. However, enough damaging information is revealed for him to lose some supporters and independents to liberal candidates in 2020 — and Democrats take the Senate in November (which would be absolutely disastrous for a second term of Trump).
- No comprehensive trade deal is reached with China that limits its tech and intellectual property theft. Separate standards for 5G and other tech is bad news for world economies. U.S. and China co-dependence erodes further but both sides stay out of Hong Kong and let the protests settle down on their own.
- Self-driving cars come closer to the forefront but a series of accidents with the vehicles causes a major manufacturer or tech company to drop out of the autonomous vehicle race.
- Under the weight of economic sanctions, Iran starts lashing out at Israel and Saudi Arabia, the Strait of Hormuz is closed and West Texas Intermediate oil soars above $70 a barrel.
- Amid a volatile market, a surge in enthusiasm pushes the S&P 500 above 3,500, earnings increase 5% and S&P stocks remain high due to the Fed’s easy money policies. Several market corrections greater than 5% will occur throughout the year.
- Big tech faces growing social and governmental scrutiny. Certain FAANG stocks underperform and S&P 500 outperforms. Proposals to break up the biggest social media companies intensifies, with greater success than previous attempts to break up Apple, Microsoft and IBM because of widespread support for the American people.
- We finally have a Brexit deal in place and the U.K. turns out to be the big winner, sending markets and the pound upward. Growth in the U.K. goes above 2% as foreign investment returns while the EU economy sinks and underperforms the U.K., U.S. and Asia.
- The bond bubble starts to sag but negative rates continue abroad. The U.S. economy slows but the benchmark 10-year Treasury approaches 2.5% while the yield curve steepens. Instead of economic fundamentals or inflation, supply and demand drives yields higher.
- Boeing finally turns it around and the 737 Max issues are fixed and deliveries begin again. The Max then becomes the leader around the world and Boeing stock returns to the top of the heap.
Among the “also ran” predictions that didn’t make the Top 10:
- Anarchy and disharmony continue to spread as populism grows, creating market turbulence around the world.
- Putin’s influence diminishes and Russia grows closer with China, and the two appear ready to face off against the U.S. and Europe.
- North Korea suspends its nuclear development program after Kim Jong Un meets with Trump again, though, he doesn’t give up his existing stockpile and North Korea continues to be a threat.
Editor’s note: What are your thoughts on some of these predictions? Are any of them way out in left field? Which one do you think is most likely to come to pass?