Tags: Wien | global | stocks | economic

Blackstone's Wien: The World's Geopolitical Threats Are Bigger Than Its Economic Problems

By    |   Monday, 08 December 2014 02:09 PM

The major problems facing the world going into 2015 are geopolitical and not economic, according to Byron Wien, vice chairman of Blackstone Advisory Partners.

In a monthly commentary on Blackstone's website, Wien ticked off the powder kegs that could drag down what he sees as mostly an otherwise benign picture.

He noted the conflict between Russia and Ukraine is unresolved, the Israel-Gaza confrontation is still in place and there is no definitive agreement with Iran on its nuclear weapons program.

Wien also worries about the lingering spat between China, Japan and other Asian nations over the South China Sea.

"Any of these could erupt into a condition that would destabilize both the world economies and the financial markets, but the one that worries me most is the Syria/ISIS/Iraq conflict. ISIS is an al Qaeda–inspired stateless terrorist movement designed to create a Sunni caliphate in the Middle East and it has already proven its military effectiveness and its ability to recruit disaffected young people from all over the world. "

By contrast, in Wien's view there is reason to think that the present favorable economic trends in the domestic economy will continue.

"Initial unemployment claims have been generally declining and the unemployment rate continues to move lower. Consumer confidence is rising and retailers are hiring aggressively in anticipation of a strong Christmas selling season, fueled partly by lower gasoline prices. The level of inflation remains low, which should help consumer spending."

For 2015, Wien predicted favorable trends for both housing and capital spending.

"Recent data showing higher paychecks for younger workers should help the former and improved small-business confidence should help the latter."

In another 2015 outlook, HSBC analysts expect the global stock market to enjoy a 7 percent return next year, Barron's reported. They advised investors to rely more on Europe and emerging markets — at the expense of U.S. markets — to hit that mark.

HSBC strategists Daniel Grosvenor and Peter Sullivan, with their teams, wrote, "We see modest upside to global equities in 2015, with earnings growth taking over as the key driver of returns. We are overweight Europe and emerging markets, and underweight the U.S. We recommend a defensive tilt at the sector level with overweight positions on telecoms, utilities, consumer staples and financials."

Grosvenor and Sullivan said a key driver in emerging markets' underperformance during the past few years has been declines in corporate profitability. "We believe this headwind is likely to begin to dissipate in 2015 alongside an improvement in profit margins," they predicted.

The analysts said that within the emerging market sphere, they prefer Central Europe, the Middle East and Africa to Latin American and Asia.

For the emerging market sector as a whole, the HSBC team said recent pessimism among investors has likely created an opportunity for 2015.

"Valuations are inexpensive relative to developed market trading well below historical averages on a range of metrics, and the region is also very out of favor amongst investors with optimism amongst sell-side analysts recently reaching a 10-year low."

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The major problems facing the world going into 2015 are geopolitical and not economic, according to Byron Wien, vice chairman of Blackstone Advisory Partners.
Wien, global, stocks, economic
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2014-09-08
Monday, 08 December 2014 02:09 PM
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