Byron Wien Sees Market Bottom by Mid-Year, Positive Real Rates

The US stock market will bottom by the middle of 2023 as the Federal Reserve tamps down inflation without causing anything worse than a “mild” economic recession, according to Byron Wien’s annual list of surprises.

Fed policy makers will not pivot toward cutting rates and keep them in restrictive territory longer than necessary, Wien, vice chairman of Blackstone Group Inc.’s private wealth solutions business, and the firm’s chief investment strategist Joe Zidle, co-wrote in a note Wednesday. The tightening will push the central bank’s benchmark rate above the consumer price index and result in positive real yields, a rarity in the past decade. The dollar will outperform major currencies like the euro and the yen because the Fed will stay more hawkish than its global peers, they said.

“The Federal Reserve remains in a tug-of-war with inflation, so it puts the word ‘pivot’ on the shelf alongside the word ‘transitory,’” the pair wrote. “Despite Fed tightening, the market reaches a bottom by mid-year and begins a recovery comparable to 2009.”

Wien, 89, a former Morgan Stanley strategist, has put out his annual “surprises” list since 1986 and attracted a wide following for his assessment of the economy and financial markets.

Wien says his surprise list is made up of events that investors assign 1-in-3 odds of happening but he thinks are more than 50% likely.