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Byron Wien: Global Turmoil Won't Trigger Bear Market in Stocks

Byron Wien: Global Turmoil Won't Trigger Bear Market in Stocks

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By    |   Tuesday, 02 August 2016 03:08 PM

Byron Wien, a Wall Street icon and vice chairman of Blackstone Advisory Partners, says stock will decline by the end of the year but will avoid a bear market – or a drop of 20 percent or more from last week’s record highs.

“The fundamental economic background remains favorable,” he says in a commentary for RealClearMarkets. “Consumer spending has been strong, with real retail sales up 4.8 percent in the second quarter and up 25 percent since 2011. Housing is also a positive.”


The bond market is also showing signs that investors don’t expect an economic slowdown while their sentiment is cautious rather than euphoric, which is typically associated with market tops, Wien says. The S&P 500 has risen 5.4 percent since the beginning of the year and reached a record high of 2,178.29 on July 22. It fell about 0.7 percent to 2,154 by mid-day Tuesday.

“One factor that should encourage investors is the leading indicator index,” Wien says. “This measure reached peaks prior to the recessions of 2001 and 2008-9. The lead time has been one to two years. The leading indicator index is still edging higher and has not reached a definitive peak yet. When it does, we will still have some time before the next recession and perhaps the next bear market.”

Stocks have shrugged off political uncertainties, including the U.S. presidential election, the U.K. exit from the European Union, the attempted military coup in Turkey and terrorist attacks in the United States and Europe, as central banks have shown a willingness to cut interest rates or keep them at record lows.

Wien estimates that stocks will decline by the end of the year because of weak company earnings.

“Stock prices are driven by earnings, and with the uncertain outlook, I believe the second half of 2016 will be a rough period for equities and the indexes will end down somewhat for the year,” he says.

Wien is concerned that companies aren’t investing in factories and equipment to make workers more productive, a sentiment echoed by Newsmax Finance Insider Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

“CEOs have hunkered down and are refusing to invest in their businesses. Capital spending is soft and restraining growth,” he says. “Even if you exclude the energy sector and its related industries, the level of investment growth is nothing special.”

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Byron Wien, a Wall Street icon and vice chairman of Blackstone Advisory Partners, says stock will decline by the end of the year but will avoid a bear market - or a drop of 20 percent or more from last week's record highs.
Byron Wien, Blackstone, market, stocks
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2016-08-02
Tuesday, 02 August 2016 03:08 PM
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