Tags: Wien | stocks | correction | 2014

Blackstone's Wien: Stocks Will Rise 20 Percent in 2014 After Enduring Early Correction

Wednesday, 08 Jan 2014 07:53 AM

By Dan Weil

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The Standard & Poor's 500 Index will experience a 20 percent increase this year after surmounting an early correction of up to 10 percent, predicts Byron Wien, vice chairman of Blackstone Advisory Partners.

In his annual list of top 10 surprises, Wien forecasts a "Dickensian market" for stocks in 2014. He was referring to the line from "A Tale of Two Cities" by Charles Dickens — "it was the best of times, it was the worst of times."

The early correction will stem from "geopolitical problems coupled with euphoric extremes," Wien writes in his list of surprises.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

"The market will really pick up speed later on in the year when some of the negatives clarify," he tells CNBC. That includes improvement in the functioning of Obamacare and in Washington's political environment, Wien says.

Stocks also will benefit from economic growth that surpasses 3 percent, he notes. Wien points out that "it was picking up at year-end." GDP expanded 4.1 percent in the third quarter.

For 2013, Wien predicted stocks would end the year little changed; however, the S&P 500 soared 29.6 percent.

He acknowledged his inaccuracy, but said, "My view on the economy wasn't too far off. I thought the economy would grow at a very feeble rate." GDP growth averaged 1.8 percent in the first two quarters of last year.

"I thought profits would probably suffer. If you look at net income, it did suffer," Wien explains. "But because of share buybacks, [per-share] profits were up about 4 percent for the S&P 500."

Here are the top four items in Wien's list of surprises, which have a better than 50 percent chance of occurring:

• The stock market's decline followed by its rise.

• "The U.S. economy finally breaks out of its doldrums," Wien writes. "The unemployment rate moves toward 6 percent. Fed tapering proves to be a non-event." The jobless rate stood at 7 percent in November.

• "The strength of the U.S. economy relative to Europe and Japan allows the dollar to strengthen. It trades below $1.25 against the euro and buys 120 yen," he adds. On Tuesday morning, the euro traded at $1.3610, and the dollar traded at 104.61 yen.

• Japan's Prime Minister Shinzo Abe "continues his aggressive fiscal and monetary expansion, and the Nikkei 225 rises to 18,000 early in the year," Wien predicts. The Nikkei closed at 15,814 Tuesday. "But the increase in the sales tax, the aging population and declining work force finally begin to take their toll, and the market suffers a sharp (20 percent) correction in the second half."

Bill Miller, manager of Legg Mason Opportunity Trust, also thinks a strong U.S. economy will drive stock prices higher this year.

"We could easily see gains of more than 20 percent," he tells The New York Times. "And the market wouldn't be overpriced at that level. . . . The path of least resistance is for the market to go higher."

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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