Ten Surprises of 2023

Byron Wien and Joe Zidle: The Ten Surprises of 2023In this edition of the Surprises – a series Byron has been publishing since 1986 – the strategists outline unexpected events that could shape the political, economic and financial landscape in 2023. 04 January 2023 New York, January 4, 2023 – Byron R. Wien, Vice Chairman together with Joe Zidle, Chief Investment Strategist in the Private Wealth Solutions group at Blackstone, today issued their list of the Ten Surprises of 2023. This is the 38th year Byron has given his views on a number of economic, financial market and political surprises for the coming year. Byron defines a “surprise” as an event that the average investor would only assign a one out of three chance of taking place but which Byron believes is “probable,” having a better than 50% likelihood of happening. Byron started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. Byron joined Blackstone in September 2009 as a senior advisor to both the firm and its clients in analyzing economic, political, market and social trends. In 2018, Joe Zidle joined Byron Wien in the development of the Ten Surprises. Byron and Joe’s Ten Surprises of 2023 are as follows: 1. Multiple candidates on both sides of the aisle organize campaigns to secure their party’s presidential nomination. There are new headliner names on the respective tickets for 2024. 2. 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 fed funds rate moves above the Personal Consumption Expenditures price index and real interest rates turn positive, a rare phenomenon relative to the last decade. 3. While the Fed is successful in dampening inflation, it over-stays its time in restrictive territory. Margins are squeezed in a mild recession. 4. Despite Fed tightening, the market reaches a bottom by mid-year and begins a recovery comparable to 2009. 5. Every significant correction in the market has in the past been accompanied by a financial “accident.” Cryptocurrencies had a major correction and that proved not to be a systemic event. This time, Modern Monetary Theory is fully discredited because deficits have proven to be inflationary. 6. The Fed remains more hawkish than other central banks, and the US dollar stays strong against major currency pairs, including the yen and euro. This creates a generational opportunity for dollar-based investors to invest in Japanese and European assets. 7. China edges toward its growth objective of 5.5% and works aggressively to re-establish strong trade relationships with the West, with positive implications for real assets and commodities.8. The US becomes not only the largest producer of oil, but also the friendliest supplier. The price of oil drops primarily as a result of a global recession, but also because of increased hydraulic fracking and greater production from the Middle East and Venezuela. The price of West Texas Intermediate crude touches $50 this year, but there’s a $100 tick out there sometime beyond 2023 as the world recovers. 9. The bombardment, destruction and casualties in Ukraine continue for the first half of 2023. In the second half, the combination of suffering and cost on both sides necessitates a ceasefire and negotiations on a territorial split begin. 10. In spite of the reluctance of advertisers to continue to support the site and the skepticism of creditors about the quality of the firm’s debt, Elon Musk gets Twitter back on the path to recovery by the end of the year. The “Also Rans” of 2023 Every year there are always a few Surprises that do not make the Ten, because we either do not think they are as relevant as those on the basic list or we are not comfortable with the idea that they are “probable.” 11. Because of medical breakthroughs across the board, many people decide on a cryogenic burial, expecting to be defrosted when a cure for the disease that caused their demise is discovered. Funeral homes across the country advertise that “It’s Nice to Be On Ice.” 12. A technology breakthrough in reducing the carbon emissions of coal-fired plants takes the edge off the climate / global warming scare. This lowers the political pressure on emerging markets to make a rapid transition to renewable energy sources.13. India begins to compete seriously to win/retain the manufacturing base that started looking for a new home after becoming increasingly uneasy with the uncertainty that has continuously surrounded US–China policies. The country initiates a campaign to attract global multinationals, focusing on its young population, relatively low income and growing consumer market, and prioritizing policies that incentivize investment in the auto, energy, pharma and tech sectors. Apple and Samsung are a proof of concept after successfully producing their respective flagship phones for global markets. (Blackstone) 20231026 Byron Wien, Wall Street Forecaster of ‘10 Surprises,’ Dies at 90Patrick Oster and Dawn Lim, Bloomberg News Byron Wien, the longtime market strategist whose annual list of “10 Surprises” made him one of the most influential voices on Wall Street during a career at Blackstone Inc. and Morgan Stanley, has died. He was 90. He died Wednesday. Wien was at Blackstone for the past 14 years and was most recently a vice chairman in the private wealth business, serving as a prognosticator of markets for the firm and its investors. “Byron’s life was remarkable in so many ways,” Blackstone Chief Executive Officer Steve Schwarzman and President Jon Gray said in a memo circulated at the firm. “He was always building new relationships and pushed everyone around him to think about the risks and opportunities that lay ahead.” Orphaned as a teenager, the Chicago-born Wien overcame a hard-luck youth to become a household name in finance with a career spanning more than 50 years. He began publishing his predictions in 1986, when he was chief US investment strategist at Morgan Stanley. The list quickly became a must-read, focusing as it did on seemingly low-probability outcomes on topics such as the direction of the S&P 500 Index, China’s economic growth and the next US president. His formula was simple but provocative: Look at things an average investor would give a 1-in-3 chance of happening but that (to Wien) had a better-than-50% likelihood of occurring. While oftentimes off-the-mark, his forecasts nonetheless were widely followed year in and year out and had the force to move financial markets. Little Downside “The great thing about Byron’s picks — and I’ve followed Byron for 30 years ... is when he’s wrong, it really doesn’t cost you anything,” stock picker Jim Cramer said on CNBC’s Squawk on the Street when Wien announced his surprises for 2018. “When he’s right, you can make a fortune.” Wien continued the tradition throughout his career. In 2009, following a stint at Pequot Capital Management Inc., he joined Blackstone to advise the firm and its clients in analyzing economic, political, market and social trends.  Wien, who came up with the list to distinguish himself from other investment strategists, said Morgan Stanley initially had deep reservations about the idea. Avoid Embarrassment “They said, ‘Byron, you could get all 10 wrong and you would embarrass the firm and humiliate yourself. Frankly, we don’t give a damn about your humiliation, but we don’t want the firm to be embarrassed,’” Wien recalled in a profile. His predictions had a mixed record of success. Many times, a majority of his forecasts were spot-on. But there were also a number of notable flubs. In January 2016, Wien thought Hillary Clinton would become president in the election later that year — and that her opponent would be Texas Senator Ted Cruz rather than Donald Trump. But in some ways, keeping score was beside the point. Even when he was wrong, Wien had the power to provoke and influence Wall Street. In 2002, he said then-Federal Reserve Chairman Alan Greenspan would likely retire, something that didn’t come to pass until 2006. Still, Wien’s prediction moved markets and spawned a number of articles about whether Greenspan would, or would not, step down. “I had a string of years, ’93, ’94 and ’95, where I got seven out of the 10 right,” he told Bloomberg. “And usually I get five or six right. But I don’t do it for score. I do it to stretch people’s thinking.” Wien’s writing gave Blackstone a following among financial advisers and wealthy people. Over the past decade, the world’s largest alternative asset manager has extended its reach beyond big pensions and endowments and now invests for a broad swath of individuals.  Lucky Break Byron Richard Wien was born on Feb. 14, 1933. His father, a doctor, died when Wien was 9. His mother died when he was 14, and her sister raised him while he finished high school on Chicago’s north side. Wien described himself as a “nerdy middle-class Jewish kid.” Wien said he caught a lucky break when his guidance counselor told him Harvard University was looking for smart kids from public schools to balance out their private school enrollees, and had asked for one student for an interview with a visiting admissions officer. “The guidance counselor called me in and said, ‘Wien’ — they called you by your last name then — ‘you’re our pick. Go downtown and don’t make a fool of yourself.’ That changed my life,” Wien recounted in Barron’s many years later. Nigeria Visit After getting a bachelor’s degree with a major in physics and chemistry, he went on to earn a master of business administration at Harvard Business School. Initially, he worked for an advertising agency in Chicago but didn’t like it. Then he served two years in the US Army before taking a consulting job that sent him to Nigeria, which he credits for spurring his lifelong interest in traveling and the developing world. In the mid-1960s, Wien moved to New York, where he was offered a job at a small investment management firm by a business school classmate. Initially, it didn’t go well. By his own telling, he lacked the training to be an analyst and was almost fired. But soon, Wien found his way and ultimately became a partner at the firm.In 1985 he moved to New York-based Morgan Stanley, where he stayed for 21 years. He made his reputation there not just for his annual list but for his popular monthly strategy essay. Lifetime Achievement First Call named him the most widely read analyst in 1998. Smart Money ranked him the No. 1 strategist two years later, and New York magazine called Wien one of the 16 most influential people on Wall Street in 2006. He received a lifetime achievement award from the New York Society of Security Analysts. At Blackstone, which he joined in 2009, Wien traveled extensively around the world to meet with investors, government officials and central bankers. Wien was a regular commentator on financial media and was loath to miss the firm’s global Monday morning meeting. A relentless networker, he also organized a series of lunches in the Hamptons each summer to discuss markets, politics and the economy. The market strategist never shied from tough debates. At past investor meetings, he squared off with Tony James, a top executive who played a key role running the firm back then, in a spirited exchange of ideas. Those debates played out on stage, leaving the audience taken aback when neither man would back down, according to Joan Solotar, who leads Blackstone’s private wealth solutions business.  “Byron could be a bit relentless” but never entered a debate with anyone with an attitude of “I’m right, you’re wrong,” she said. And he bolstered his arguments with facts. “He understood you can’t predict where an interest rate or market will be,” Solotar said. “But you can look at the facts presented and do the analysis, and aim for a better-than-50% chance.”  Life Lessons Wien published a list of 20 lessons learned over the course of the first 80 years of his life. They included: travel extensively, read all the time and network intensely. The last one, characteristically, was to never retire. As Wien put it: “If you work forever, you can live forever. I know there is an abundance of biological evidence against this theory, but I’m going with it anyway.” In recent years, he worked with his successor. Joe Zidle, chief investment strategist at Blackstone’s private wealth solutions business, joined Wien in formulating the “10 Surprises” in 2018. This year, they predicted the market would bottom by mid-year and begin a recovery comparable to 2009. The duo made another prediction: “Elon Musk gets Twitter back on the path to recovery by the end of the year.” Wien was married twice. After his first marriage, to a school teacher, ended in divorce, he married Anita Volz, chairwoman of the Observatory Group, a macroeconomic consulting firm based in New York.