Following a 25 year tradition that began when he was chiefU.S.investment strategist at Morgan Stanley, Byron Wien, vice chairman of Blackstone Advisory Partners, today released his list of surprises for 2012. Wien predicts that theU.S.economy will expand 3 percent this year on the back of falling joblessness and increased investment by companies in new equipment. He said oil will slip to $85 a barrel this year, the Standard & Poor’s 500 Index will exceed 1,400 andUS unemployment rate will drop below 8 percent. “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.
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He is upbeat about emerging economies and says that stock indexes in China,India and Brazilwill rally at least 15 percent this year. His prediction for crude oil implies a drop of 14 percent from last year’s closing level, while the S&P 500 forecast would require an 11 percent gain. On the political front, he expects President Barack Obama to be pitted against Republican Mitt Romney in this year’s election with Democrats winning the House and losing the Senate. He expectsEuropeto come out of the sovereign-debt crisis and avoid a bank meltdown. Wien sees gold futures at $1,800 an ounce and the 10-year Treasury yields at 4%, which ended 2011 at 1.88 percent.
The financial soothsayer acknowledges that many of his annual predictions have been wrong. In January 2011 Wien said thatU.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’shigh pointwas 1,363.61. Wien was however correct in predicting a drop in theU.S.unemployment rate and a surge in gold and oil prices. In 2009, Wien, who was then chief investment strategist for Pequot Capital Management Inc., predicted rallies in equities, gold and oil.
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.