Byron Wien, vice chairman of the advisory services unit at Blackstone Group LP, says that despite all the market chaos when “the world seemed to change in the middle of August,” he still sees a bright U.S. economic future.
“I still believe the data will show that the U.S. economy in the second half of 2015 will exceed the growth shown in the first half and that 2016 will be another year in the 2%–3% real growth range,”
he wrote in Barron’s.
“At the beginning of the year I thought the S&P 500 could end 2015 with double-digit appreciation and, while that may prove to be too optimistic, I still believe the index will show a gain for the year," he wrote.
“I am aware of the numerous serious long-term problems facing the world. These include huge sovereign debt obligations, margins peaking, increasing pressure on middle class workers (both blue and white collar) caused by technology and globalization, decaying infrastructure, rising social welfare costs, geopolitical conflicts, Middle East uncertainty and a dysfunctional government in Washington,” he pointed out.
“All of these factors should weigh on multiples over time, but they do not turn me bearish. I recognize the best recent period for investing in equities may have been 1982–1999, but I still think reasonable risk-adjusted returns for equities are likely in the years ahead, and that Treasurys and high-quality corporate bonds are less attractive,” he wrote.
However, not everyone is as optimistic.
Bill Gross, who in January predicted that many asset classes would end the year lower, said U.S. equities have another 10 percent to fall and investors should sit out the current volatility in cash.
The whipsaw market reaction to the lackluster U.S. jobs report last week shows that markets, especially stocks, high-yield bonds and some emerging market debt, are trading like a casino, Gross told Bloomberg.
Gross, who earlier made prescient calls on German bunds and Chinese equities, said U.S. stocks will drop another 10 percent because economic conditions don’t support a rally like in 2013, when corporate profits were going up.
“More negative numbers lie ahead and if you define a bear market by a 20 percent correction, at some point — that’s six to 12 months — we’ll have a classic definition of a bear market, meaning another 10 percent downside,” he said.
“Cash doesn’t yield anything but it doesn’t lose anything,’’he said. “Investors need cold water splashed on their face and sit out the dance.”
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