Byron Wien of Blackstone provided his annual list of “10 surprises” predicted for the new year, defining “surprise” as an event most see as having less than a 33% chance of happening but which he believes have a 50% or greater chance of occurrence,. Here is a summary of his list:
- Hillary Clinton will be elected and Democrats will take the Senate
- U.S. equity markets will have a down year
- The Fed will only raise rates by 25 basis points once in 2016
- A weak U.S. economy and soft equity market cause overseas investors to reduce investment in the United States, and the dollar declines 1.2 against the euro.
- China suffers a near-hard landing, reducing growth and the yuan is reduced to seven against the dollar.
- Breaking up the European Union comes back on the table as a result of the refugee crisis, undermining the long-term outlook for the euro.
- Oil remains down, staying in the 30s, and supply/demand strain does not arise.
- High-end real estate prices in New York and London decline sharply, causing pressure for developers.
- Yield on the 10-year Treasury remains below 2.5%, while investors continue to view bonds as a safe haven.
- Global growth slows to 2%, driven by softening GNP in the U.S., China, and elsewhere.
Wien also offers five additional “surprises” that didn’t make the top ten list because he sees them as either less relevant or less probable, including pharmaceutical break-throughs and stabilization of commodities prices.