U.S. stocks may have closed at five year highs last week, but a long-time market watcher told CNBC on Wednesday that the S&P 500 Index could see a correction from current levels before recovering by year's end.
"I have a bearish outlook," said Byron Wien, Blackstone Advisory Partners vice chairman. "The market will have a swoon here — trade at 1,300, down 10 percent from where it is right now. ... [But] it will end the year pretty flat."
Wien gave his market outlook as No. 2 on his annual Top 10 Market Surprises. He started the list back in 1986, when he was the chief U.S. investment strategist at Morgan Stanley. He said the events on the list have at least a 50 percent chance of happening.
Stocks are poised to head lower because earnings are decelerating, he told "Squawk Box."
"S&P 500 earnings are going to be down year over year," he said, adding that they'll be lower than tempered expectations. "Below $100 ... maybe $95."
Wien expects large-cap multinationals to come through, despite what he said are "too many people making too much stuff out there. ... The world competitive environment is too intense."
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No. 10 on Wien's Surprises list dealt with Europe. He said stocks there are in for a rough year — as much as a 10 percent decline — as its mild recession continues.
However, he is bullish on gold as Surprise No. 8, saying prices could rise 14 percent this year, bucking expectations. "Most people think gold has run out of steam."
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In a press release last week, Wien revealed the following predictions:
- No. 10: The structural problems of Europe remain largely unresolved and the mild recession that began there in 2012 continues. Civil unrest subsides as the weaker countries adjust to austerity. Greece proves successful in implementing policies that reduce wasteful government expenditures and raise revenue from citizens who had been evading taxes. European equities, however, decline 10 percent in sympathy with the U.S. market.
- No. 9: The Japanese economy remains lackluster and the yen declines to 100 against the dollar. The Nikkei 225 continues the strong advance that began in November and trades above 12,000 as exports improve and investors return to the stocks of the world's third largest economy.
- No. 8: Although inflation remains tame, the price of gold reaches $1900 an ounce as central bankers everywhere continue to debase their currencies and the financial markets prove treacherous.
- No. 7: Climate change contributes to another year of crop failures, resulting in grain and livestock prices rising significantly. Demand for grains in developing economies continues to increase as the standard of living rises. More investors focus on commodities as an investment opportunity and increase their allocation to this asset class. Corn rises to $8 a bushel, wheat to $9 a bushel and cattle to $1.50 a pound.
- No. 6: The new leaders in China seem determined to implement reforms to root out corruption, to keep the economy growing at 7 percent or better and to begin to develop improved health care and retirement programs. The Shanghai Composite finally comes alive and the "A" shares are up more than 20 percent in 2013, in contrast with the previous year when Chinese stocks were down and some developing markets, notably India, rose.
- No. 5: In a surprise reversal the Republicans make a major effort to become leaders in immigration policy. They sponsor a bill that paves the way for illegal immigrants to apply for citizenship if they have lived in the United States for a decade, have no criminal record, have a high school education or have served in the military, and can pass an English proficiency test. Their goal for 2016 is to win the Hispanic vote, which they believe has a naturally conservative orientation and which put the Democrats over the top in 2012.
- No. 4: In a surprise reversal the Democrats sponsor a vigorous program to make the United States independent of Middle East oil imports before 2020. The price of West Texas Intermediate crude falls to $70 a barrel. The Administration proposes easing restrictions on hydraulic fracking for oil and gas in less populated areas and allowing more drilling on Federal land. They see energy production, infrastructure and housing as the key job creators in the 2013 economy.
- No. 3: Financial stocks have a rough time, reversing the gains of 2012. Intense competition in commercial and investment banking, together with low trading volumes, puts pressure on profits. Layoffs continue and compensation erodes further. Regulation increases and lawsuits persist as an industry burden.
- No. 2: A profit margin squeeze and limited revenue growth cause 2013 earnings for the Standard & Poor's 500 to decline below $100, disappointing investors. The S&P 500 trades below 1300. Companies complain of limited pricing power in a slow, highly competitive world economic environment.
- No. 1: Iran announces it has adequate enriched uranium to produce a nuclear-armed missile and the International Atomic Energy Agency confirms the claim. Sanctions, the devaluation of the currency, weak economic conditions and diplomacy did not stop the weapons program. The world must deal with Iran as a nuclear threat rather than talk endlessly about how to prevent the nuclear capability from happening. Both the United States and Israel shift to a policy of containment rather than prevention.
Looking back at his top two 2012 Surprises, Wien nailed it.
(Watch Video: Wien's 2012 Market Surprises)
His No. 2 Surprise was "Earnings for American corporations continue to move higher driving the Standard & Poor's 500 above 1,400." The S&P closed last year at 1,426, rising 13 percent.
Wien's No. 1 Surprise for 2012 was "The extraction of oil and gas from shale and rock begins to be a game changer." U.S. Energy Information Administration said on Monday that a boom in shale oil production will raise domestic crude output by a fifth over the next decade. The EIA also expects that the United States will produce 7 percent more natural gas between 2010 and 2035 than previously projected.
—By CNBC's Matthew J. Belvedere; Follow him on Twitter