Tags: Byron Wien | Federal Reserve | Interest Rate | Hike

Byron Wien: Fed Will Surprise Markets With Rate Hike Before Mid-Year

By    |   Monday, 05 January 2015 06:26 PM

For each of the last 30 years, Byron Wien, vice chairman of Blackstone Advisory Partners, has put together a list of what he sees as the 10 biggest surprises for the coming year.

One of the major predictions on the 2015 list is that the Federal Reserve "finally raises short-term interest rates, well before the middle of the year, encouraged by the improving employment data and strong Gross Domestic Product growth," Wien writes.

"The timing proves faulty, however, as the momentum of the economy has begun to flag and a short-term slowdown has started. The end of monetary accommodation and rising rates precipitate a correction in equities."

The Fed has kept its federal funds rate target at a record zero to 0.25 percent for six years. Most economists expect it to begin raising rates around mid-year.

Wien also forecasts that "the year-end 2014 meltdown in the high yield [bond] market, as a result of the collapse in the price of oil, creates a huge buying opportunity."

The spread of junk bonds over Treasurys will shrink by 50 percent, he says. "And high yield becomes the best performer of the various asset classes, as the U.S. economy continues to grow."

Star bond investor Bill Gross, now at Janus Capital Group, thinks Wien is dead wrong on the Fed.

"With the U.S. dollar strengthening and oil prices declining, it is hard to see the Fed raising short rates until late in 2015, if at all [this year]," he said in a commentary on Janus' web site.

"With much of the benefit from loose monetary policies already priced into the markets, a more conservative investment approach may be warranted by maintaining some cash balances. Be prepared for low returns in almost all asset categories."

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For each of the last 30 years, Byron Wien, vice chairman of Blackstone Advisory Partners, has put together a list of what he sees as the 10 biggest surprises for the coming year.
Byron Wien, Federal Reserve, Interest Rate, Hike
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2015-26-05
Monday, 05 January 2015 06:26 PM
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