Byron Wien Calls For New Highs In Stocks, After Getting 9 Out Of 10 Predictions Wrong In 2010

Byron Wien

Byron Wien, formerly of Morgan Stanley and Pequot Capital Management, has just called for the S&P 500 to go to new records in 2011.

Sounds great!

And Byron could use a nice happy bull market, given that he got an astounding 90% of his predictions last year wrong.

Wien came out guns blazing at the start of 2010, making a series of predictions about U.S. and global markets that have, well, failed to come through.

Wien, who is now with Blackstone, makes these top 10 predictions every year.

So how did he do in 2010, prediction by prediction?

WRONG: Higher than Expected US Growth

Original Prediction: The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%. Exports, inventory building and technology spending lead the way. Standard and Poor's 500 operating earnings come in above $80.

Actual Result: Unemployment is nearly at 10%, the growth rate for Q3 is 2.5%.

Source: Byron Wien Announces Top 10 Surprise For 2010

WRONG: The Fed Raises Rates

Original Prediction: The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy. In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end.

Actual Result: The Fed has kept rates at all time lows and engaged in a new round of quantitative easing.

Source: Byron Wien Announces Top 10 Surprise For 2010

WRONG: Treasury Yields Up, Demand Declines

WRONG: Up and Down Year for the S&P

Original Prediction: In a roller coaster year the Standard and Poor's 500 rallies to 1300 in the first half and then runs out of steam and declines to 1000, ending where it started at 1115.10. Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem. Concern about longer term growth and obligations to reduce leverage at both the public and private level unsettle investors.

Actual Result: The S&P 500 never reached 1300. It is at its high for the year.

Source: Byron Wien Announces Top 10 Surprise For 2010

WRONG: Dollar Rally

Original Prediction: Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. Longer term prospects remain uncertain.

Actual Result: The dollar has moved around all year, but the euro remains above the $1.30 mark. It has weakened against the yen.

Source: Byron Wien Announces Top 10 Surprise For 2010

WRONG: Japan Becomes Increasingly Attractive

Original Prediction: Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve. Investors focus on the attractive valuations of dozens of medium sized companies in a market selling at one quarter of its 1989 high. The Nikkei 225 rises above 12,000.

Actual Result: Japan's currency increased in value. The Nikkei is at 10,232.

Source: Byron Wien Announces Top 10 Surprise For 2010

WRONG: Obama Goes Nuclear to Combat Climate Change

Original Prediction: Believing he must be a leader in climate control initiatives, President Obama endorses legislation favourable for nuclear power development. Arguing that going nuclear is essential for the environment, will create jobs and reduce costs, Congress passes bills providing loans and subsidies for new plants, the first since 1979. Coal accounts for about 50% of electrical power generation, and Obama wants to reduce that to 25% by 2020.

Actual Result: President Obama made no serious push on nuclear power, and energy reform was not enacted.

Source: Byron Wien Announces Top 10 Surprise For 2010

WRONG: Democrat Political Fight Back

Original Prediction: The improvement in the U.S. economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum. In the November Congressional election the Democrats only lose 20 seats, much less than expected.

Actual Result: The Democrats lost the mid-term elections and the economy did not recover.

Source: Byron Wien Announces Top 10 Surprise For 2010

HALF RIGHT: Financial Reform is Fangless

Original Prediction: When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared. There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous. Trading volume and merger activity increases; financial service stocks become exceptional performers in the U.S. market.

Actual Result: From the looks of it, financial reform is fangless. But we really don't know, since Dodd-Frank only recently went into effect. This one might work out for Byron.

Source: Byron Wien Announces Top 10 Surprise For 2010

HALF RIGHT: Iran Succumbs to Protest, Pakistan Proves More Difficult

Original Prediction: Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favour of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides. Talks with the U.S. and Europe begin but the country remains a nuclear threat. Pakistan becomes the hotspot in the region because of the weak government there, anti-American sentiment, active terrorist groups and concerns about the security of the country's nuclear arsenal.

Actual Result: Ahmadinejad remains in power, Iran still doesn't like Israel very much, and is still working on its nuclear weapons program. Byron was spot on about Pakistan, however.

Source: Byron Wien Announces Top 10 Surprise For 2010

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