Tags: Wien | 10% | correction | stock

Blackstone's Wien: Stock Market Poised for 10 Percent Correction

Thursday, 16 Jan 2014 07:48 AM

By Dan Weil

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The stock market's smooth rise upward in 2012 and 2013 sets it up for a 10 percent correction early this year, says Byron Wien, vice chairman at Blackstone Advisory Partners.

"What's going to cause it is that everybody's on one side of the boat here," he told CNBC. "Almost everybody's made good money — maybe not 30 percent last year — but everybody was up. . . . People are generally feeling pretty positive. There's almost a euphoric mood."

The Standard & Poor's 500 Index generated a total return of 32.4 percent last year and hasn't endured a 10 percent setback since October 2011.

Editor’s Note: 38 Trades That Could Turn $1,000 Into $49,000

But the market's optimism can turn around in a hurry, Wien notes.

"When investor sentiment is as positive as this, [the market is] usually vulnerable to any kind of a disappointment," he adds.

"There could be some earnings disappointment in the fourth quarter. And the geopolitical situation is still pretty unsettled. So you never know what it's going to be. But you do know that when sentiment is euphoric, the market is vulnerable."

Still, Wien expects the S&P 500 to register a total return of about 20 percent for the year. It closed at 1,848.38 Wednesday.

"I don't know that I'd be short the market, because I'm so bullish for the overall year, I don't want to be that cute," he states. "But I do think if the market's going to suffer, it's going to suffer in the early part of the year, and it's going to suffer because sentiment is too one-sided."

Meanwhile, James Paulsen, chief strategist of Wells Capital Management, sees stocks advancing early in the year amid economic strength and then falling 10 percent later to end 2014 little changed.

"I think at some point, the flip side of good economic momentum is going to become problematic," he tells Yahoo. Paulsen is concerned that interest rates and inflation will rise.

Editor’s Note: 38 Trades That Could Turn $1,000 Into $49,000

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