Byron Wien, predicts that gross domestic product will expand almost twice as fast as economists forecast in 2010 while the S&P’s 500 Index ends the year unchanged. Byron Wien was one of the strategists that correctly predicted rallies in equities, gold and oil last year.
An advance in stocks in the first half will give way to losses as the S&P 500 drops as low as 1,000 before finishing 2010 where it began. As real economic growth climbs toward 5 percent, the Federal Reserve will start boosting interest rates in the second quarter, pushing its target for overnight loans between banks to 2 percent.
“Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem for stocks", said Byron Wien. “Concern about longer- term growth and obligations to reduce leverage at both the public and private level unsettle investors.”
Wien picked Japan as the best-performing “major industrialized” nation this year, saying a weaker yen will help exports, pushing the Nikkei 225 Stock Average above 12,000, a 13 percent gain from the 2009 close.
Financial-service stocks will beat the market, Wien said. A few days ago Marc Faber said that his best contrarian play for 2010 was to buy japanese banks. I am also very bullish on japan as I see very limited downside risk at these levels. Remember that the Nikkei 225 topped at 40,000 points 20 years ago...
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