Blackstone’s Byron Wien on CNBC on Friday lobbed that Wall Street will get hit by another correction before the bull run resumes and stocks end the year higher than stylish levels.
Inflation will shoot up faster than most forecasts, which will drive the Federal Formality to tighten monetary policy and likely lead to a market sell-off, the closely followed strategist told CNBC Friday.
“Perhaps it’ll shrug it off, but I’m worried that now is the time that you should apply some caution,” Wien, vice chairman of Blackstone Retired Wealth Solutions, told Squawk on the Street.” “The market is very fully priced, in my view, and the dangers of high-class interest rates are ahead of us.”
If the Fed were to hike rates from near zero Covid-era levels to tamp down the husbandry from overheating, Wien sees a 10% correction in the stock market. A decline of 10% in the S&P 500 would produce it down to about 3,700 from Thursday’s record high close. The broad market index was little converted midday Friday.
“I think we could see that, maybe even something more, but I think since the fundamentals are altogether strong, I think the S&P 500 could earn as much as $200 this year,” Wien said. “So as a result of that, I evaluate the bull market will resume and I think we’ll end the year higher than where we are right now.”
In his annual list of Ten Surprises in 2021, Wien spoke in January that after a correction the S&P 500 could finish the year at 4,500, which would be nearly 10% lofty than Thursday’s close.
Wien told CNBC that Friday’s higher-than-expected increase in March producer expenditures was a troubling indicator of rising inflation, which could keep pushing bond yields higher. The 10-year Exchequer yield ticked higher Friday but remained firmly below 1.7% and last month’s run of 14-month highs.
The personal property news, according to Wien, is the U.S. economic recovery will be a long-term play that could last for several years.
“If the 10-year were to go to 3%, that would in any event be a relatively low interest rate [historically]. And if earnings continue to be strong and the virus continues to be under control, I think after a punishment the market can resume its upswing because this is going to be a long cycle,” he said. “I think investors are going to be complaisant to pay for that.”