Tags: byron wien | federal reserve | stock market | investors

Blackstone's Byron Wien Predicts 10 Percent Stock-Market Rise

By    |   Friday, 29 May 2015 02:15 PM

While the U.S. stock market is “long overdue for at least a 10 percent correction,” it is actually poised to “rise 10 percent or more by the end of the year,” predicts Byron Wien, vice chairman of Blackstone Advisory Partners.

“The U.S. market has been long overdue for at least a 10 percent correction. It has been three years since the last one,” he wrote in an opinion piece for Barron’s.

“Sentiment among investors is optimistic or complacent, not a condition conducive to a sustained upward market move. I still maintain a positive outlook for the S&P 500 for 2015, but perhaps we have to endure a little pain first," he wrote.

"By the second half of the year, the market mood may be more subdued and the fundamentals of the economy may be better, providing a more favorable environment for stocks to move higher,” he wrote.

“I still expect the S&P 500 to rise 10% or more by the end of the year, but it will have to get there on the basis of fundamentals without the help of liquidity provided by the Federal Reserve,” he wrote.

“If I am right, the Fed contributed almost $3 trillion (some may have gone into bonds) to the $13 trillion rise in the stock market appreciation from the 2009 low to the current level,” he wrote.

“I am occasionally questioned about the possibility of a bubble forming in the Nasdaq as a result of the strong performance of technology and biotechnology stocks in the current cycle. Investors clearly have not forgotten the excesses of the 1999-2000 period. Looking at the data, however, there seems to be much less froth this time around.”

Meanwhile, Mohamed El-Erian, chief economic adviser at Allianz, warns of a “big air pocket” in stocks, which could spell trouble down the road for investors.

“What worries me is fundamentals at some point have to validate valuations,” he told CNBC.

“At some point fundamentals have got to validate valuations,” he said. “I think since 2008 we have been muddling through and we have been powered by policy, ultraloose experimental central bank policy and money coming back from the corporate sector,” he said.

“At some point, if that doesn't get validated by fundamentals, then we're going to find that we have pushed public markets too far. I think that's the key point. Focus on the longer-term valuating valuations, otherwise quite a big air pocket” awaits stocks.

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While the U.S. stock market is "long overdue for at least a 10 percent correction," it is actually poised to "rise 10 percent or more by the end of the year," predicts Byron Wien, vice chairman of Blackstone Advisory Partners.
byron wien, federal reserve, stock market, investors
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2015-15-29
Friday, 29 May 2015 02:15 PM
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