Blackstone strategist Byron Wien warns that while there won’t be a bear stock market or recession, volatility and slow economic growth will continue to vex investors.
“Technically, the market is very oversold and the Ned Davis Crowd Sentiment Indicator, which has proven helpful to me in the past, shows levels of pessimism comparable to 2012, but not 2009,” Wien, vice chairman of Blackstone Advisory Partners, writes for Barron's.
“The two big worries I have about the economy are capital spending and productivity. Weak oil prices have brought energy exploration and capital projects to a halt. The question is whether the consumer and housing can keep the economy from falling into a general recession. So far it looks as though we will be able to pull through with about 2 percent growth this year,” he predicts.
Wien also says he is worried about the action of the credit markets. “The concern is that a number of oil companies will be unable to meet their financial obligations and this will weaken the whole credit system. Investors are reminded of the sub-prime crisis in 2007 when these loans were less than 20 percent of all bank loans but they left us vulnerable to a potential meltdown of the commercial banks. I do not think bad energy loans will do the same damage, but that is the concern of the market,” he says,
“Concerns about world stability may also be influencing investor apprehension,” Wien says.
He also warned about the presidential race.
“Outsider candidates in both parties are gaining traction, which should be no surprise when you consider that more than 70 percent of the population believes the country is headed in the wrong direction. Investors are fearful of radical change, and all of the outsider candidates represent a major policy shift,” he says.
“If one of the outsiders were to win the presidency, Washington would become a chaotic place and the financial markets would not react well to that. The passing of Supreme Court Justice Antonin Scalia and the prospect of a battle over his successor present another uncertainty to the market,” says Wien.
Meanwhile, billionaire Warren Buffett said the U.S. economy appears weaker than he thought it would be as recently as last fall, but that doesn't change his optimistic long-term view of the country's prospects.
The economy continues growing slowly, and Buffett is confident the U.S. economy will improve over time, but plunging oil prices have had a significant impact.
"Business is a little softer in many places than I anticipated four or five months ago. That doesn't mean it's in reverse," said Buffett, who is Berkshire's chairman and CEO. "The country will grow in value over time," he told CNBC.
Newsmax Finance Insider Hans Parisis agrees. "At least in my opinion, the U.S. still remains by far the best location in a “bad” global neighborhood," Parisis wrote.
(Newsmax wire services and the AP contributed to this report).
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