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Byron Wien: Investors to Be Stuck With 5 Percent Annual Return for Years

Byron Wien: Investors to Be Stuck With 5 Percent Annual Return for Years

By    |   Tuesday, 24 May 2016 08:20 AM

Blackstone Group strategist and investment icon Byron Wien is warning that investors must prepare for lackluster returns for the near future.

“Investors will be lucky to get a 5% to 7% annual return” in the coming years, he told Barron’s.

He also believes that the global economy will expand at just 2% this year, below early-year official forecasts of more than 3%, Barron’s reported. Gross domestic product increased at a 0.5 percent annual rate, the weakest since the first quarter of 2014, the Labor Department said in its advance estimate.

The U.S. economy will struggle to grow at more than a 2% annual rate, he says. “I don’t think that’s satisfactory to many Americans who want higher growth and the benefits that come with that,” he told Barron’s.

“On politics, his prediction of an election victory by Hillary Clinton and Democratic control of the Senate looks good now, but he forecast the wrong Republican insurgent to win the nomination: Ted Cruz,” Barron’s reported.

With the possibility now of a Trump presidency, he says, “I’m hopeful that the checks and balances in the American political system will restrain Trump from implementing some of his more extreme ideas.”

And he’s more liberal politically than some of his friends and cares about U.S. economic competitiveness and income inequality, Barron’s explained. “The world has changed since 1980 due to globalization and technology,” he told Barron's.

“As a result, the top 20% has improved their standard of living, the middle 60% has held their own, and the bottom 20% has lost ground. Income inequality has been exacerbated since the recession ended.”

Recapping Wien’s predictions:

  • US stocks will have a down year amid weak earnings and a price-earnings ration contraction.
  • The Fed will only raise short-term interest rates once this year, by 25 basis points.
  • Oil prices will linger in the $30 range amid slow global growth, additional crude from Iran and the refusal of Saudi Arabia to limit shipments.
  • High end residential real estate in New York and London will have a sharp downturn as Russian and Chinese buyers disappear from the market in both locations.
  • The 10-year Treasury yield will stay below 2.5 percent amid the weak US economy and sluggish equity market.
  • Wien also is cautiously optimistic on China and worried about Japan.

To be sure, U.S. economic growth stumbled sharply in the first quarter to its slowest pace in two years as consumer spending softened and a strong dollar continued to undercut exports, but a pick-up in activity is anticipated given a buoyant labor market, Reuters reported.

"The economy essentially stalled in the first quarter, but that doesn't mean it is faltering," said Newsmax Finance Insider Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "Some of the restraints to growth are dissipating. Growth is likely to accelerate going forward."

Many other analysts predict the economy could accelerate in the second half of the year.

"The economy is looking better," David Kotok, the chief economist at Cumberland Advisors, told NPR. And despite weaker-than-expected jobs growth in the month of April, Kotok says, if you look over the past few months, both "wages and jobs are in a positive trend."

This year has seen pretty anemic growth so far for the U.S. economy — with gross domestic product increasing at less than 1 percent.

"I think real GDP growth will be stronger for the rest of the year," says Mark Zandi, chief economist of Moody's Analytics. "The bottom line is that the economy is performing reasonably well, and all the economic trend lines look good for the foreseeable future."

(Newsmax wire services contributed to this report).

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byron wien, global economic, investors, growth
Tuesday, 24 May 2016 08:20 AM
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