Tags: Wien | stock | valuations | housing

Blackstone's Wien Worries About Stock Valuations, Housing

By    |   Tuesday, 07 October 2014 08:25 AM

Byron Wien, vice chairman of Blackstone Advisory Partners, is optimistic about the stock market and economy for the rest of the year.

But he has several concerns, including stretched valuations for stocks and fragility in the housing sector.

As for valuations, "I look at trailing 12-month earnings, and on that basis bubbles occur at 25 to 30 times [earnings], some distance from the current level," Wien writes in a market commentary. The S&P 500 had a trailing price-earnings ratio of 18.8 Friday, according to Birinyi Associates.

But, "the valuation context could change if earnings fall short of estimates," Wien says. "Right now analysts seem to be stepping up their forecasts."

As for housing, that's "the one economic area I am concerned about," Wien writes.

"With the improvement in employment and continued low interest rates I would have expected the monthly figures on housing starts, new and existing home sales and mortgage applications for purchase to be consistently strong."

Instead, "the data have been mixed," he notes.

The S&P/Case-Shiller 20-city home price index rose 6.7 percent in the 12 months through July, the smallest gain since November 2012.

"Housing is a key component of growth, so this is an area that bears close attention."

Meanwhile, many analysts say fears of slowing economic growth are unwarranted. GDP expanded 4.6 percent in the second quarter, and many economists anticipate growth of at least 3 percent for the second half of the year.

"There seems to be this lingering doubt" about whether the U.S. economy is truly rebounding, Jim Dunigan, chief investment officer at PNC Wealth Management, tells The Wall Street Journal. "They are probably worrying about the wrong thing."

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Byron Wien, vice chairman of Blackstone Advisory Partners, is optimistic about the stock market and economy for the rest of the year.
Wien, stock, valuations, housing
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2014-25-07
Tuesday, 07 October 2014 08:25 AM
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