- Blackstone Vice Chairman and investing ace Byron Wien is out with his list of 10 “surprises” for 2018.
- These predictions, he says, have a better-than-50% chance of happening, but the average investor assigns them only about a one-in-three chance.
- The list, now in its 33rd year, includes a 10% stock market correction, populism worsening, and Republicans losing big in the midterm elections.
Blackstone vice chairman and investing stalwart Byron Wien is out with his list of surprises for 2018.
Wien defines his surprises as things that have a better-than-50% chance of happening, but which the average investor anticipates a less than 30% likelihood of occurring.
2017 was not the strongest year in terms of how his forecasts played out. When Business Insider spoke to Wien in September, he acknowledged that he had been “dead wrong” on the dollar, wrong on inflation, and on the German election (Angela Merkel won a fourth term a few days later).
President Donald Trump definitely did not soften his tone, the euro didn’t reach parity against the dollar (it’s at a three-year high), and crude oil sneaked above $US60 per barrel in the final week of 2017.
Here’s what Wien thinks could happen in 2018:
China gets serious about North Korea’s nuclear threat — and gets results
“China finally decides that a nuclear capability in the hands of an unpredictable leader on its border is not tolerable even though North Korea is a communist buffer between itself and democratic South Korea. China cuts off all fuel and food shipments to North Korea, which agrees to suspend its nuclear development program but not give up its current weapons arsenal.”
“In the United Kingdom Jeremy Corbyn becomes the next Prime Minister. In spite of repressive action by the Spanish government, Catalonia remains turbulent.”
The dollar turns around after a weak year
“Real growth exceeds 3% in the United States, which, coupled with the implementation of some components of the Trump pro-business agenda, renews investor interest in owning dollar-denominated assets, and the euro drops to 1.10 and the yen to 120 against the dollar.”
The S&P 500 falls 10%
“… speculation reaches an extreme and ultimately the S&P 500 has a 10% correction. The index drops toward 2300, partly because of higher interest rates, but ends the year above 3000 since earnings continue to expand and economic growth heads toward 4%.”
WTI crude oil rises above $US80 per barrel
“The price rises because of continued world growth and unexpected demand from developing markets, together with disappointing hydraulic fracking production, diminished inventories, OPEC discipline and only modest production increases from Russia, Nigeria, Venezuela, Iraq and Iran.”
Inflation becomes a problem …
“Tight labour markets in the industrialized countries create wage increases. In the United States, average hourly earnings gains approach 4% and the Consumer Price Index pushes above 3%.”
… which prompts higher interest rates
“The Federal Reserve increases short-term rates four times in 2018 and the 10-year U.S. Treasury yield moves toward 4%, but the Fed shrinks its balance sheet only modestly because of the potential impact on the financial markets.”
NAFTA and the Iran agreement remain despite Trump
“Too many American jobs would be lost if NAFTA ended, and our allies universally support continuing the Iran agreement.”
Republicans lose control of the House and Senate in the midterm elections
“Voters feel disappointed that many promises made during Trump’s presidential campaign were not implemented in legislation and there is a growing negative reaction to his endless Tweets.”
Xi Jinping decides it’s best to temporarily allow China’s economy to slow down
“Xi Jinping, having broadened his authority at the 19th Party Congress in October, focuses on China’s credit problems and decides to limit business borrowing even if it means slowing the economy down and creating fewer jobs.”
And now, some of the also-rans:
These are surprises that Wien doesn’t think are probable or as relevant as the ten above.
– Regulators place restrictions on bitcoin trading.
– Special Counsel Robert Mueller’s probe into collusion with Russia in the 2016 election fails to implicate any member of the Trump family.
– Cyberattacks get worse.
– Regulators in Europe and the US start to investigate Amazon, Facebook, and Google for anti-competitive behaviour.
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