Byron Wien, vice chairman of advisory services at private equity titan Blackstone, sees a breakout year for the economy.
In a list of the top 10 surprises for 2010, Wien wrote on Blackstone’s Web site, “The U.S. economy grows at a stronger than expected 5 percent real rate, and the unemployment level drops below 9 percent.”
Rising exports, inventories and technology spending will fuel the move, Wien says.
He also expects the central bank to reverse its stimulus.
“The Federal Reserve decides the economy is strong enough to move away from zero interest rate policy,” he wrote.
“In a series of successive hikes beginning in the second quarter, the federal funds rate reaches 2 percent by year-end
The 10-year Treasury yield will rise above 5.5 percent, thanks to massive government borrowing and reluctance by foreign central banks to keep buying our paper.
Wien anticipates a roller coaster year for stocks. First the Standard & Poor’s 500 Index will rise to 1,300, he predicts.
Then it will fall to 1,000, and then it will rebound to end the year at 1115, just where it started.
“Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem,” he wrote.
Nobel laureate economist Paul Krugman doesn’t share Wien’s optimism about the economy, telling Bloomberg there’s a 30 to 40 percent chance of a double-dip recession.
“It is not a low probability event,” Krugman said.
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