Predictions: Greece, Italy Will Default; S&P Will Top 1400
Special to CNBC.com
What kind of surprises are in store for 2012?
If Byron Wien, vice chairman of Blackstone Advisory Partners, is correct: Italy and Greece will default on their debt but will remain in the European Union. The Standard & Poor's 500 will get above 1400. Unemployment will fall below 8 percent and GDP growth will top 3 percent. Mitt Romney will be the GOP nominee for president. He will be defeated by President Obama — providing those predictions on unemployment and GDP come true.
These are some of the items on Byron Wien's annual list of "surprises."
Wien told CNBC Wednesday he remains optimistic about a rising stock market in 2012, an improving U.S. economy and a Europe that manages to come up with a long-lasting plan to solve its financial problems.
"Europe has much too much to lose if the European Union dissolves," Wien said. That's why he thinks Greece and Italy will stay in the EU even though he expects a Greek default and the "strong possibility" of an Italian default on its debt .
Wien sees oil falling to $85 a barrel as more oil is extracted from shale and rock. "Extraction from resources in the U.S. is going to be a game changer," he said. He is also still bullish on gold, saying it will go for $1,800 a troy ounce.
He told CNBC his own investments include U.S. equities, large-cap multinationals, energy, some pharmaceuticals and technology. He named no specific companies.
Wien did pretty well last year, getting eight of his 10 predictions right — his misses involved stocks and bonds: He predicted the S&P would end the year at 1500 and the yield on the 10-year Treasury bond would close out 2011 at 5 percent.
Wien, the former chief U.S. investment strategist for Morgan Stanley , isn't the first to think the economy will be a big factor in whether President Obama is re-elected. With the exception of President Obama, he sees an "anti-incumbent" wave at the polls, which would put the Democrats in charge of the House of Representatives and the Republicans in control of the Senate — a 180-degree change from the current Congress.
Even more surprising, he sees the Congress cutting $1.2 trillion from the federal deficit over 10 years. "I don't think we can wait until the end of the year" to cut the deficit, Wien said. "Right now nobody thinks anything will happen before the election. There’s too much that has to happen between the election and Jan. 1" including defense and health-care funding and deciding whether to let the Bush tax cuts expire.
Among his other predictions, Wien also thinks investors will go long on currencies of "prudent countries" such as Norway, Singapore and Australia.