Blackstone's Byron Wien says stock market is fairly valued, years of 20% returns are behind us

Published Thu, Oct 7 202112:25 PM EDTUpdated Thu, Oct 7 20213:28 PM EDT

Blackstone 's Byron Wien does not see a lot of upside for the stock market from here — and going into 2022, he added that outsized annual returns may be hard to come by. "I think the market is fairly valued at 4,500" on the S & P 500 and a 2% yield on the 10-year Treasury , Wien said Thursday on "Squawk on the Street," sticking with the numbers he forecast in January. Back then, the 10-year yield was below 1%, and the S & P 500 traded around 3,750. He said he doesn't believe the 10-year yield will go to 3% — but if it did, he thinks that would be "very negative" for stocks. The S & P 500 rallied more than 1% Thursday after short-term deal to raise the debt-ceiling was reached, marking a third straight day of gains for the benchmark. The index traded above 4,400 and boasts a nearly 18% gain for 2021. The rotation out of bonds into stocks in recent days pushed the 10-year Treasury yield to 1.56%. Bond prices move inversely to yields. Wien thinks the S & P 500 could go up 5% to 10% next year if corporate earnings live up to estimates. But the Blackstone Private Wealth Solutions Group's vice chairman warned that, while he believes stocks are still in a bull market, "the 20% years are behind us" in terms of annual returns. Known for his annual predictions list of market surprises , which he started while a strategist at Morgan Stanley in the mid-1980s, Wien on Thursday ran through a list of what he believes the market is thinking in the near-term about the back-and-forth in Washington. Wien said the market thinks the debt ceiling will be raised beyond the emergency period ending Dec. 3, and the bipartisan infrastructure bill will be passed. He said the market thinks President Joe Biden 's $3.5 trillion package of social and environmental spending will be scaled back and passed. Biden in recent days conceded that the measure, which Democrats hope to pass with no GOP votes, will have to be smaller . The market got ahead the fundamentals recently, and that's reason for the recent decline, Wien said, reiterating that stocks could see a "modest drift up" going forward. September was the worst month of the year for stocks, and October has lived up to its reputation of being a volatile month. Many strategists do point out that the fourth quarter overall tends to be a good stretch for the market. As for inflation, Wien said it's not going away and that he never thought it was going to be "transitory" as the Federal Reserve thought earlier this year. He pointed to higher commodity prices as well as "sticky" rent and wage increases. Wien also cited supply chain disruptions leading to higher prices and companies' "pricing power" to pass those costs on to consumers. Last month, Fed Chairman Jerome Powell acknowledged in testimony before a Senate panel hearing that the causes of the recent rise in inflation may last longer than anticipated .

Byron Wien

Chris Goodney | Bloomberg | Getty Images

Blackstone's Byron Wien does not see a lot of upside for the stock market from here — and going into 2022, he added that outsized annual returns may be hard to come by.