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Byron Wien: Uncertainties Hold the Market Hostage

Byron Wien: Uncertainties Hold the Market Hostage
(Dollar Photo Club)

By    |   Tuesday, 03 November 2015 08:14 AM

Byron Wien, vice chairman of Blackstone Advisory Partners, warns that a lot of unfinished business is holding the stock market hostage and creating “a lack of enthusiasm” at the moment.

“Even though the earnings outlook for 2016 is favorable, investors are reluctant to expand their portfolios in the face of so many uncertainties,” he wrote for Barron’s.

“The “will she or won’t she” ambivalence about increasing short-term interest rates by the Federal Reserve is clearly one factor confusing investors. That the Fed failed to raise rates in September, while indicating they will do so before year-end, is puzzling in the face of the fundamentals,” he wrote.

“The economy is growing modestly, but there are important areas of weakness, and inflation is not a problem. While unemployment is down to 5.1%, you have to wonder how many people who would like to have a job have given up looking for one, given that the participation rate is at 62.4%,” he wrote.

“My view continues to be that there is too much attention paid to the issue of Fed policy. If they raise rates, it will be by a small amount and they will do so gradually. With the dollar strong and economic weakness throughout the world, the Fed is likely to delay any policy change. When and if a rate increase finally happens, it may knock the equity market down for a while, but it won’t cause a bear market.”

To be sure, ask any bond trader in Tokyo, London or New York what their view on the global economy is, and you’re likely to get a similar, decidedly downbeat answer, Bloomberg reports.

That’s not just because fixed-income types are a dour bunch at the best of times. A quick scan across government debt markets suggests that investors are pricing in the likelihood that growth and inflation around the world will remain tepid for years to come.

In Europe, bonds yielding less than zero have ballooned to $1.9 trillion, with the average yield on securities in an index of euro-area sovereign notes due within five years turning negative for the first time. Worldwide, the bond market’s outlook for inflation is now close to levels last seen during the global recession. And even in the U.S., the bright spot in the global economy, 10-year Treasury yields are pinned near 2 percent -- well below what most on Wall Street expected by now.

“Where are the animal spirits to turn us around?” said Charles Diebel, the London-based head of rates at Aviva Investors, which oversees about $377 billion. What you see in the bond market is “a lack of confidence in the future.”

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Byron Wien, vice chairman of Blackstone Advisory Partners, warns that a lot of unfinished business is holding the stock market hostage and creating “a lack of enthusiasm” at the moment.
byron wien, blackstone, stock market, invest
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2015-14-03
Tuesday, 03 November 2015 08:14 AM
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