The Tell: Legendary Wall Street investor warns of ‘several’ 5% market corrections in 2020

The Tell: Legendary Wall Street investor warns of ‘several’ 5% market corrections in 2020

11 Jan    Finance News

Last year, Blackstone’s Byron Wien absolutely nailed a few of the stock-market calls he made on his list of “Ten Surprises” that he’s been publishing, typically with input from fellow billionaire George Soros, since 1986.

For one, he predicted the Shanghai Composite SHCOMP, -0.08% would rally 25%. It gained 22%. He said Brazil’s equity market would come alive. The Bovespa BVSP, -0.38% surged 34%. He said the S&P 500 SPX, -0.29% would rally 15%. It easily outperformed that. Not bad.

“The most positive factor was the accommodative monetary policy provided by the U.S. and other countries, which had a favorable impact on the economy and the financial markets,” the company explained in retrospect.

And Wien, with the help of Blackstone BX, -0.22% strategist Joe Zidle, neared perfection with this call: “Growth stocks continue to provide leadership in the U.S. equity market. Technology and biotech do well as a result of continued strong earnings. Value stocks other than energy-related businesses disappoint because of the slowing economy.”

So what’s his take on where the market is going in 2020?

“Even though some observers believe valuations are stretched, a surge in investor enthusiasm pushes the Standard and Poor’s 500 above 3,500 at some point during the year,” he wrote. “Earnings only increase 5%, and S&P 500 multiples remain elevated because monetary policy is easy and investors become more comfortable that intermediate interest rates will rise slowly.”

But it won’t be an easy cruise higher. Wien said he expects “several market corrections” of at least 5% in the coming year. Much of the pain, he predicts, will be felt by the FAANG stocks, long the leaders of this bull market.

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“Big tech companies face growing political scrutiny and social blowback,” he said, adding that government efforts to regulate companies like Apple AAPL, +0.23%  , Microsoft MSFT, -0.46% and IBM IBM, -0.04% will be more successful than in the past because they will have widespread support from the American people.

“A millennial in New York City puts their phone down and makes eye contact with another human and finds it non-threatening and refreshing,” Wien wrote.

Some of his other surprise prediction include a Fed funds drops to 1%, Democrats take the Senate in November, self-driving cars stall out, the straits of Hormuz get shut down and Boeing BA, -1.91% solves its 737 Max issues.

Click here for the full list.

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