Seit 1986, als er noch "Chief U.S. Investment Strategist" bei Morgan Stanley war, publiziert Byron Wien jeweils Anfang Jahr eine Liste von "Surprises" für das kommende Jahr in den Bereichen Wirtschaft, Finanzmärkte, Politik und Gesellschaft. Seit 2020 publiziert er die Liste zusammen mit Joe Zidle, Chief Investment Strategist in der Private Wealth Solutions group von Blackstone.
Byron Wien definiert einen "Surprise" als Ereignis, welchem der durchschnittliche Investor nur eine Eintrittswahrscheinlichkeit von 33% zuordnet, welchem aber er selbst eine Eintrittswahrscheinlichkeit von 50% und mehr zuordnet.

Byron Wien ist Vice Chairman in der "Private Wealth Solutions group" bei Blackstone. Er kam 2009 als "senior advisor" zu Blackstone um für die Firma und deren Kunden Trends in den Bereichen Oekonomie, Politik, Soziales und Finanzmärkte zu analysieren.

  1. While the prices of some commodities decline, wages and rents continue to rise and the Consumer Price Index and other widely followed measures of inflation increase by 4.5% for the year. Declines in prices of transportation and energy encourage the die-hard proponents of the view that inflation is “transitory,” but persistent inflation becomes the dominant theme.
  2. The combination of strong earnings clashes with rising interest rates, resulting in the S&P 500 making no progress in 2022. Value outperforms growth. High volatility continues and there is a correction that approaches, but does not exceed, 20%.
  3. The bond market begins to respond to rising inflation and tapering by the Federal Reserve, and the yield on the 10-year Treasury rises to 2.75%. The Fed completes its tapering and raises rates four times in 2022.
  4. In spite of the Omicron variant, group meetings and convention gatherings return to pre-pandemic levels by the end of the year. While Covid remains a problem throughout both the developed and the less-developed world, normal conditions are largely restored in the US. People spend three to four days a week in offices and return to theaters, concerts, and sports arenas en masse.
  5. Chinese policymakers respond to recent turmoil in the country’s property markets by curbing speculative investment in housing. As a result, there is more capital from Chinese households that needs to be invested. A major asset management industry begins to flourish in China, creating opportunities for Western companies.
  6. The price of gold rallies by 20% to a new record high. Despite strong growth in the US, investors seek the perceived safety and inflation hedge of gold amidst rising prices and volatility. Gold reclaims its title as a haven for newly minted billionaires, even as cryptocurrencies continue to gain market share.
  7. While the major oil-producing countries conclude that high oil prices are speeding up the implementation of alternative energy programs and allowing US shale producers to become profitable again, these countries can’t increase production enough to meet demand. The price of West Texas crude confounds forward curves and analyst forecasts when it rises above $100 per barrel.
  8. Suddenly, the nuclear alternative for power generation enters the arena. Enough safety measures have been developed to reduce fears about its dangers, and the viability of nuclear power is widely acknowledged. A major nuclear site is approved for development in the Midwest of the United States. Fusion technology emerges as a possible future source of energy.
  9. ESG evolves beyond corporate policy statements. Government agencies develop and enforce new regulatory standards that require public companies in the US to publish information documenting progress on various metrics deemed critical in the new era. Federal Reserve governors spearhead implementation of stress tests to assess financial institutions’ vulnerability to climate change scenarios.
  10. In a setback to its green energy program, the United States finds it cannot buy enough lithium batteries to power the electric vehicles planned for production. China controls the lithium market, as well as the markets for the cobalt and nickel used in making the transmission rods, and it opts to reserve most of the supply of these commodities for domestic use.

    11. 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."

    Also Rans:

  11. The FDA approves the first ex vivo gene-editing treatment. This stimulates further research into genomic medicine, and progress is accelerated on developing in vivo gene therapies. Ethical concerns around CRISPR technology inspire heated debate, but also focus investor attention on the pharmaceuticals and health care sectors.
  12. The digital economy gets a major boost when Jamie Dimon reverses his position on cryptocurrencies and J.P. Morgan seeks to become a leader in the space. Crypto becomes a major factor in the financial markets.
  13. The United States and China both seek to become the global leader in advanced semiconductor capabilities in order to reduce their dependence on offshore manufacturing of the technology. The US government commits major funds to private contractors for semiconductor research, while China focuses on state-owned enterprises to get the job done.
  14. Puerto Rico becomes the new retirement destination of choice. People are attracted by the good weather and low tax rates, and they put aside fears of hurricanes.
  1. Former President Trump starts his own television network and also plans his 2024 campaign. His lead program is The Chief, in which he weekly interviews heads of state and CEOs with management styles like his own. His virtual interview with Vladimir Putin draws more viewers than any television program in history.
  2. Despite the hostile rhetoric from both sides during the U.S. presidential campaign, President Biden begins to restore a constructive diplomatic and trade relationship with China. China A shares lead emerging markets higher.
  3. The success of between five and ten vaccines, together with an improvement in therapeutics, allows the U.S. to return to some form of “normal” by Memorial Day 2021. People are generally required to show proof of vaccination before boarding airplanes and attending theaters, movies, sporting events and other large gatherings. The Summer Olympics, postponed last year, are held in July with spectators allowed to physically attend.
  4. The Justice Department softens its case against Google and Facebook, persuaded by the argument that the consumer actually benefits from the services provided by these companies. Certain divestitures are proposed and surveillance restrictions are applied, but the broad effort to break them up loses support, except in Europe.
  5. The economy develops momentum on its own because of pent-up demand, and depressed hospitality and airline stocks become strong performers. Fiscal and monetary policy remain historically accommodative. Nominal economic growth for the full year exceeds 6% and the unemployment rate falls to 5%. We begin the longest economic cycle in history, surpassing the cycle that lasted from 2010 to 2020.
  6. The Federal Reserve and the Treasury openly embrace Modern Monetary Theory as their accommodative policies continue. As long as growth exceeds the rate of inflation, deficits don’t seem to matter. Because inflation increases modestly, gold rallies and cryptocurrencies gain more respect during the year.
  7. Even as energy company executives cut estimates for long-term growth, near-term opportunities are increasing. The return to “normal” increases both industrial activity and mobility, and the price of West Texas Intermediate oil rises to $65/bbl. Rig counts increase and energy high yield bonds rally soundly. Energy stocks are among the best performers in 2021.
  8. The equity market broadens out. Stocks beyond health care and technology participate in the rise in prices. “Risk on” is not without risk and the market corrects almost 20% in the first half, but the S&P 500 trades at 4,500 later in the year. Cyclicals lead defensives, small caps beat large caps and the “K” shaped equity market recovery unwinds. Big cap tech is the source of liquidity, and the stocks are laggards for the year.
  9. The surge in economic growth causes the 10-year Treasury yield to rise to 2%. The yield curve steepens, but a concomitant increase in inflation keeps real rates near zero. The Fed wants the strength in housing and autos to continue. As a result, it extends the duration of bond purchases in order to prevent higher rates at the long end of the curve from choking off credit to consumers and businesses.
  10. The slide in the dollar turns around. The post-vaccine strength of the U.S. economy and financial markets attracts investors disenchanted with the rising debt and slower growth of Europe and Japan. Treasurys maintain a positive yield and the carry trade continues.

    11. 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."

    Also Rans:

  11. Cyber-attacks, mostly from Eastern Europe and the Middle East, begin to have an economic impact. Bank account information is invaded and distorted, patient records are lost at hospitals and credit collection companies can’t keep track of customer purchases. Those tampering prove to be more skillful than those protecting the integrity of the data and the dislocation cost becomes significant.
  12. Tesla acquires a major global auto manufacturer in a transaction that involves a combination of cash and stock. Elon Musk is the CEO and pledges to eliminate the internal combustion engine by the end of the decade.
  13. Kim Jong-un threatens to explode his latest long-range missile, capable, he says, of reaching Los Angeles. Trump invites him onto TV and explains that Kim will be a better person and the world will be a better place if he works with other countries rather than threatening them. Kim agrees to stop testing long-range missiles. Trump looks into the camera and says, “People say I am the best negotiator.”
  1. The economy disappoints the consensus forecast, but a recession is avoided. Federal Reserve Chair Powell lowers the Fed funds rate to 1%. Without a comprehensive trade deal in hand, President Trump exercises every executive authority he has to stimulate growth and ward off recession. He cuts payroll taxes to put more money in the hands of consumers.
  2. Concepts of inequality and climate change become important election themes, but centrist ideas prevail. The House of Representatives sends articles of impeachment to the Senate, but Donald Trump is not convicted or removed from office. Enough information is revealed in the proceedings to cause some of his supporters, as well as many independents, to throw their support to liberal candidates in 2020 state races. The Democrats take the Senate in November.
  3. There is no comprehensive Phase Two trade deal that limits China’s ability to acquire intellectual property. National interests result in the balkanization of technology. The development of separate standards for 5G and other tech hardware proves to be bad news for the future of world economies. The move toward "decoupling" gains traction in negotiations with China. US economic co-dependence with China erodes. Both China and the US keep their hands off Hong Kong and let the protest settle down by itself.
  4. The prospect of a self-driving car is pushed further into the future. A series of accidents with experimental vehicles causes a major manufacturer or technology company to issue a statement that they’re no longer developing self-driving technology.
  5. Emboldened by the pain of economic sanctions, Iran capitalizes on a lack of American leadership abroad by stepping up acts of hostility against Israel and Saudi Arabia. The straits of Hormuz are closed and the price of oil (West Texas Intermediate) soars to over $70/barrel.
  6. Even though some observers believe valuations are stretched, a surge in investor enthusiasm pushes the Standard and Poor’s 500 above 3500 at some point during the year. Earnings only increase 5%, and S&P 500 multiples remain elevated because monetary policy is easy and investors become more comfortable that intermediate interest rates will rise slowly. Volatility increases and there are several market corrections greater than 5% throughout the year.
  7. Big tech companies face growing political scrutiny and social blowback. Once the market leaders, certain FAANG stocks underperform and the equal-weighted S&P 500 outperforms. There are popular plans proposed to break up the largest social media platforms and increase regulation and government oversight. This has greater success than prior government efforts against Apple, Microsoft and IBM, because it has widespread support from the American people. A millennial in New York City puts their phone down and makes eye contact with another human and finds it non-threatening and refreshing.
  8. Having secured a workable Brexit deal, the United Kingdom turns out to be the winner in its divorce from the European Union. The equity market rises and the pound rallies. The U.K. benefits from a long transition period and growth exceeds 2% as foreign direct investment resumes now that the outlook is clarified. The EU economy remains soft, and European markets other than the UK underperform the US and Asia.
  9. The bond bubble starts to leak, but negative rates continue abroad. Even though the U.S. economy is slowing, the 10-year Treasury yield approaches 2.5% and the yield curve steepens. Japan and China pull away from the Treasury auctions. Rather than economic fundamentals or inflation, supply and demand drive yields higher.
  10. The problems with Boeing’s 737 Max are fixed and deliveries begin. The plane becomes a fixture around the world, enabling airlines to operate more efficiently and increase profits. The stocks become market leaders.

    11. 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."

    Also Rans:

  11. Fears of an economic crisis in India ameliorate. The emerging markets continue to have uneven performance but India recovers from decelerating growth. The Modi government continues business friendly growth reforms, the economy grows at 6% and the market rises 20%.
  12. Artificial intelligence begins to be viewed as a paper tiger. The AI jobs apocalypse fails to materialize, much like the Y2K bug failed to undermine the US economy 20 years earlier. Manufacturing jobs have already been automated and it proves harder to eliminate service jobs by using computer-based applications.
  13. Economic problems in Russia intensify even though the price of oil rises. As a result, social unrest begins to spread. Putin’s cozy relationship with his circle of oligarchs becomes an issue and his influence as a world leader diminishes. He becomes closer to China to maintain his stature on the world stage. In spite of serious differences, China and Russia appear prepared to face off against Europe and the United States.
  14. Populism and inward-thinking continue to spread globally, particularly in emerging markets. Anarchy and disharmony spread throughout the world, creating turbulence in financial markets everywhere. Investors turn away from emerging market local currency debt, forcing spreads higher.
  15. North Korea agrees to suspend its nuclear development program after another meeting with President Trump, but does not give up its existing stockpile. Kim Jong-un halts work on a long-range missile capable of reaching the United States. North Korea continues to be a threat, but not an imminent danger.
  1. The weakening world economy encourages the Federal Reserve to stop raising the federal funds rate during the year. Inflation remains subdued and the 10-year Treasury yield stays below 3.5%. The yield curve remains positive.
  2. Partly because of no further rate increases by the Federal Reserve and more attractive valuations as a result of the market decline at the end of 2018, the S&P 500 gains 15% for the year. Rallies and corrections occur but improved earnings enable equities to move higher in a reasonably benign interest rate environment.
  3. Traditional drivers of GDP growth, capital spending and housing, make only modest gains in 2019. The expansion continues, however, because of consumer and government spending. A recession before 2021 seems unlikely.
  4. The better tone in the financial markets discourages precious metal investors.Gold drops to $1,000 as the equity markets in the United States and elsewhere improve.
  5. The profit outlook for emerging markets brightens and investor interest intensifies because the price earnings ratio is attractive compared to developed markets and historical levels. Continuous expansion of the middle class in the emerging markets provides the consumer buying thrust for earnings growth. China leads and the Shanghai composite rises 25%. The Brazil equity market also comes to life under the country’s new conservative leadership.
  6. March 29 comes and goes and there is no Brexit deal. Parliament fails to approve one and Theresa May, arguing that a change in leadership won’t help the situation, remains in office. A second referendum is held and the U.K. votes to remain.
  7. The dollar stabilizes at year-end 2018 levels and stays there throughout the year. Because of concern about the economy, the Federal Reserve stops shrinking its balance sheet, which is interpreted negatively by currency traders. The flow of foreign capital into United States assets slows because of a softer monetary policy and a lack of need for new capital for business expansion.
  8. The Mueller investigation results in indictments against members of the Trump Organization closest to the president but the evidence doesn’t support any direct action against Trump himself. Nevertheless, an exodus of Trump’s most trusted advisors results in a crisis in confidence that the administration has the people and the process to accomplish important goals.
  9. Congress, however, with a Democratic majority, gets more done than expected, particularly on trade policy.Progress is made in preserving important parts of the Affordable Care Act and immigration policy.A federal infrastructure program to be implemented in 2020 is announced.
  10. Growth stocks continue to provide leadership in the U.S. equity market. Technology and biotech do well as a result of continued strong earnings. Value stocks other than energy-related businesses disappoint because of the slowing economy.

    11. 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."

    Also Rans:

  11. Geopolitical tensions increase. Iran continues to destabilize the Middle East and Kim Jong Un fails to live up to his North Korea denuclearization promises. Secretary of State Pompeo and National Security Advisor Bolton make statements indicating the United States may take pre-emptive action in both places, thereby causing one of several sharp market sell-offs. But in spite of hostile rhetoric, the United States does not go to war with anyone as we approach the 2020 election. Trump’s tough talk on some issues like trade works, however, and leads to successful diplomatic negotiations on national security.
  12. In desperation China engages in ambitious infrastructure programs to bolster its economy. China grows at 6.5% real, but the increased debt causes concern around the world and has a negative impact on the renminbi.
  13. China announces, "We want to be the world leaders in free trade."It sends envoys around the globe to negotiate better bilateral trade terms in order to offset the losses from the ongoing U.S. disagreements. Joint ventures in which foreign companies control the majority share are initiated in all sectors, from industrials and autos to raw materials. As China’s influence around the world becomes greater, the U.S. further isolates itself.
  14. The European Central Bank is forced to restart quantitative easing in response to a defiant Italy, a weakening Germany and Brexit.Thwarting expectations that Brexit would bring the rest of Europe closer together, Italy realizes that it can break all fiscal rules without any fear of punishment from the E.U. As a result, the Italian economy falls into recession, debt spreads surge and the ECB is forced to liquefy the system again.
  1. China finally decides that a nuclear capability in the hands of an unpredictable leader on its border is not tolerable even though North Korea is a communist buffer between itself and democratic South Korea. China cuts off all fuel and food shipments to North Korea, which agrees to suspend its nuclear development program but not give up its current weapons arsenal.
  2. Populism, tribalism and anarchy spread around the world. In the United Kingdom Jeremy Corbyn becomes the next Prime Minister. In spite of repressive action by the Spanish government, Catalonia remains turbulent. Despite the adverse economic consequences of the Brexit vote, the unintended positive consequence is that it brings continental Europe closer together with more economic cooperation and faster growth.
  3. The dollar finally comes to life. Real growth exceeds 3% in the United States, which, coupled with the implementation of some components of the Trump pro-business agenda, renews investor interest in owning dollar-denominated assets, and the euro drops to 1.10 and the yen to 120 against the dollar. Repatriation of foreign profits held abroad by U.S. companies helps.
  4. The U.S. economy has a better year than 2017, but speculation reaches an extreme and ultimately the S&P 500 has a 10% correction. The index drops toward 2300, partly because of higher interest rates, but ends the year above 3000 since earnings continue to expand and economic growth heads toward 4%.
  5. The price of West Texas Intermediate Crude moves above $80. The price rises because of continued world growth and unexpected demand from developing markets, together with disappointing hydraulic fracking production, diminished inventories, OPEC discipline and only modest production increases from Russia, Nigeria, Venezuela, Iraq and Iran.
  6. Inflation becomes an issue of concern. Continued world GDP growth puts pressure on commodity prices. Tight labor markets in the industrialized countries create wage increases. In the United States, average hourly earnings gains approach 4% and the Consumer Price Index pushes above 3%.
  7. With higher inflation, interest rates begin to rise. The Federal Reserve increases short-term rates four times in 2018 and the 10-year U.S. Treasury yield moves toward 4%, but the Fed shrinks its balance sheet only modestly because of the potential impact on the financial markets. High yield spreads widen, causing concern in the equity market.
  8. Both NAFTA and the Iran agreement endure in spite of Trump railing against them. Too many American jobs would be lost if NAFTA ended, and our allies universally support continuing the Iran agreement. Trump begins to think that not signing on to the Trans-Pacific Partnership was a mistake as he sees the rise of China’s influence around the world. He presses for more bilateral trade deals in Asia.
  9. The Republicans lose control of both the Senate and the House of Representatives in the November election. Voters feel disappointed that many promises made during Trump’s presidential campaign were not implemented in legislation and there is a growing negative reaction to his endless Tweets. The mid-term election turns out to be a referendum on the Trump Presidency.
  10. Xi Jinping, having broadened his authority at the 19th Party Congress in October, focuses on China’s credit problems and decides to limit business borrowing even if it means slowing the economy down and creating fewer jobs. Real GDP growth drops to 5.5%, with only minor implications for world growth. Xi proclaims this move will ensure the sustainability of China’s growth over the long term.

    11. 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."

    Also Rans:

  11. Investors recognize that the earnings of companies in Europe, the Far East and the emerging markets are growing faster than those in the United States while the price earnings ratios in those regions are lower than those in America. Global investments become more broadly represented in institutional portfolios.
  12. The Mueller investigation of the 2016 presidential election fails to implicate any members of the Trump family in collusion with Russian operatives.
  13. Artificial intelligence gains visible momentum. Service sector jobs are automated, particularly clerks in legal and finance professions, as well as workers in fast food outlets and healthcare. Economists begin to question the unemployment data because the rate drops below 4% while so many people still appear to be out of work and seeking government assistance.
  14. Cyberattacks become more prevalent and begin to affect consumer confidence. A major money center bank suspends deposits or withdrawals for three days because its system is penetrated. Numerous retail organizations report that customer personal information has been obtained by hackers. Those invading corporate information systems appear to be smarter and more innovative than the internal employees protecting the computer data, suggesting that the systems themselves need to be upgraded.
  15. The regulatory authorities in Europe and the United States finally get concerned about the creative destruction of Internet-related businesses. As a result of pressure from retailers and traditional media companies, they begin an investigation of anti-competitive practices at Amazon, Facebook and Google. The public begins to think these companies have too much power.
  16. The risks in Bitcoin are so great that regulatory authorities restrict trading. Among their concerns are: no regulatory oversight; no safety and soundness measures; no recourse in the event of mistaken or miscalculated transactions; high cyber risk; no deposit insurance. (Risk source: Morgan Stanley.)
  1. Still brooding about his loss of the popular vote, Donald Trump vows to win over those who oppose him by 2020. He moves away from his more extreme positions on virtually all issues to the dismay of some right wing loyalists. He insists, "The voters elected me, not some ideology." His unilateral actions throw policy staffers throughout the government into turmoil. Virtually all of the treaties and agreements he vowed to tear up on his first day in office are modified, not trashed. His wastebasket remains empty.
  2. The combination of tax cuts on corporations and individuals, more constructive trade agreements, dismantling regulation of financial and energy companies, and infrastructure tax incentives pushes the 2017 real growth rate above 3% for the U.S. economy. Productivity improves for the first time since 2014.
  3. The Standard & Poor’s 500 operating earnings are $130 in 2017 and the index rises to 2500 as investors become convinced the U.S. economy is back on a long-term growth path. Fears about a ballooning budget deficit are kept in the background. Will dynamic scoring reducing the budget deficit actually kick in?
  4. Macro investors make a killing on currency fluctuations. The Japanese yen goes to 130 against the dollar, stimulating exports there. As Brexit moves closer, the British pound declines to 1.10 against the dollar, causing a surge in tourism and speculation in real estate. The euro drops below par against the dollar.
  5. Increased economic growth, inflation moving toward 3%, and renewed demand for capital push interest rates higher across the board. The 10-year U.S. Treasury yield approaches 4%.
  6. Populism spreads over Europe affecting the elections in France and Germany. Angela Merkel loses the vote in October. Across Europe the electorate questions the usefulness of the European Union and, by the end of the year, plans are actively discussed to close it down, abandon the euro and return to their national currencies.
  7. Reducing regulations in the energy industry leads to a surge in production in the United States. Iran and Iraq also step up their output. The increased supply keeps the price of West Texas Intermediate below $60 for most of the year in spite of increased world demand.
  8. Donald Trump realizes he has been all wrong about China. Its currency is overvalued, not undervalued, and depreciates to eight to the dollar. Its economy flourishes on consumer spending on goods produced at home and greater exports. Trump avoids punitive tariffs to prevent a trade war and develops a more cooperative relationship with the world’s second largest economy.
  9. Benefiting from stronger growth in China and the United States, real growth in Japan exceeds 2% for the first time in decades and its stock market leads other developed countries in appreciation for the year.
  10. The Middle East cools down. Donald Trump and his Secretary of State Rex Tillerson, working with Vladimir Putin, finally negotiate a lasting ceasefire in Syria. ISIS diminishes significantly as a Middle East threat. Bashar al-Assad remains in power.Also rans:Every year there are always a few Surprises that do not make the Ten either because I do not think they are as relevant as those on the basic list or I am not comfortable with the idea that they are "probable."
  11. Having grown weary of Washington after a year in the presidency, Donald Trump moves the White House to New York from April to December and to Palm Beach from January to March. He makes day trips to the Capitol on Air Force One for legislative and diplomatic purposes.
  12. The Democratic Party is sharply divided on strategy, with Bernie Sanders and Elizabeth Warren arguing for a shift to the left and others wanting to remain in the center. A lack of leadership gives rise to widespread speculation about sharp losses in the 2018 congressional elections.
  13. Donald Trump’s intimidation tactics prove effective in discouraging companies from moving some U.S. manufacturing abroad, but he fails to bring jobs back. The wage differential is just too great. This becomes his biggest first-year disappointment.
  14. Trump’s first major international confrontation comes, not unexpectedly, from North Korea. Kim Jong-un threatens to set off a nuclear bomb in the mid-Pacific, calling it "a test." Trump’s advisors try to restrain his desire to punish the country severely.
  15. India comes back into the investment limelight. Its economy grows at 7% and corporate profits for established companies are strong. Its stock market leads other large emerging countries, along with China.
  16. Trump’s efforts to get out of the Iran deal fail. The other countries signing the agreement believe Iran’s weapons-grade nuclear production has been restrained and force the U.S. to remain a participant.
  1. Riding on the coattails of Hillary Clinton, the winner of the presidential race against Ted Cruz, the Democrats gain control of the Senate in November. The extreme positions of the Republican presidential candidate on key issues are cited as factors contributing to this outcome. Turnout is below expectations for both political parties.
  2. The United States equity market has a down year. Stocks suffer from weak earnings, margin pressure (higher wages and no pricing power) and a price- earnings ratio contraction. Investors keeping large cash balances because of global instability is another reason for the disappointing performance.
  3. After the December rate increase, the Federal Reserve raises short-term interest rates by 25 basis points only once during 2016 in spite of having indicated on December 16 that they would do more. A weak economy, poor corporate performance and struggling emerging markets are behind the cautious policy. Reversing course and actually reducing rates is actively considered later in the year. Real gross domestic product in the U.S. is below 2% for 2016.
  4. The weak American economy and the soft equity market cause overseas investors to reduce their holdings of American stocks. An uncertain policy agenda as a result of a heated presidential campaign further confuses the outlook. The dollar declines to 1.20 against the euro.
  5. China barely avoids a hard landing and its soft economy fails to produce enough new jobs to satisfy its young people. Chinese banks get in trouble because of non-performing loans. Debt to GDP is now 250%. Growth drops below 5% even though retail and auto sales are good and industrial production is up. The yuan is adjusted to seven against the dollar to stimulate exports.
  6. The refugee crisis proves divisive for the European Union and breaking it up is again on the table. The political shift toward the nationalist policies of the extreme right is behind the change in mood. No decision is made, but the long-term outlook for the euro and its supporters darkens.
  7. Oil languishes in the $30s. Slow growth around the world is the major factor, but additional production from Iran and the unwillingness of Saudi Arabia to limit shipments also play a role. Diminished exploration and development may result in higher prices at some point, but supply/demand strains do not appear in 2016.
  8. High-end residential real estate in New York and London has a sharp downturn. Russian and Chinese buyers disappear from the market in both places. Low oil prices cause caution among Middle East buyers. Many expensive condominiums remain unsold, putting developers under financial stress.
  9. The soft U.S. economy and the weakness in the equity market keep the yield on the 10-year U.S. Treasury below 2.5%. Investors continue to show a preference for bonds as a safe haven.
  10. Burdened by heavy debt and weak demand, global growth falls to 2%. Softer GNP in the United States as well as China and other emerging markets is behind the weaker than expected performance.

    11. 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."

    Also Rans:

  11. As a result of enhanced security efforts, terrorist groups associated with ISIS and al Qaeda do NOT mount a major strike involving 100 or more casualties against targets in the U.S. or Europe in 2016. Even so, the United States accepts only a very limited number of asylum seekers from the Middle East during the year.
  12. Japan pulls out of its 2015 second half recession as Abenomics starts working. The economy grows 1%, but the yen weakens further to 130 to the dollar. The Nikkei rallies to 22,000.
  13. Investors get tough on financial engineering. They realize that share buybacks, mergers and acquisitions, and inversions may give a boost to earnings per share in the short term, but they would rather see investment in capital equipment and research that would improve long-term growth. Multiples suffer.
  14. 2016 turns out to be the year of breakthroughs in pharmaceuticals. Several new drugs are approved to treat cancer, heart disease, diabetes, Parkinson’s and memory loss. The cost of developing the breakthrough drugs and their efficacy encourage the political candidates to soften their criticism of pill pricing. Life expectancy will continue to increase, resulting in financial pressure on entitlement programs.
  15. Commodity prices stabilize as agricultural and industrial material manufacturers cut production. Emerging market economies come out of their recessions and their equity markets astonish everyone by becoming positive performers in 2016.
  1. The Federal Reserve finally raises short-term interest rates, well before the middle of the year, encouraged by the improving employment data and strong Gross Domestic Product growth. The timing proves faulty, however, as the momentum of the economy has begun to flag and a short-term slowdown has started. The end of monetary accommodation and rising rates precipitate a correction in equities. Long-term Treasury rates stay where they started and the yield curve flattens.
  2. Our luck runs out on cyber terrorism. Hackers invade the personal and corporate accounts of a major money center bank and the Federal Reserve orders the institution to suspend transactions for five business days while the accuracy of its balances is verified. Various government departments and agencies are mobilized to deal with the problem caused by the hackers having proved to be more skillful than our corporate cyber security efforts.
  3. The year-end 2014 rally in United States equities continues as the market rises for a strong performance in 2015. A growing economy, fueled by housing and capital spending and favorable earnings, enables the Standard & Poor’s 500 to increase 15% during the year, outperforming equities in most major industrialized countries throughout the world.
  4. Mario Draghi finally begins to expand the balance sheet of the European Central Bank aggressively by buying sovereign debt, mortgages and corporate bonds. In spite of this expansion, Europe falls back into a serious recession. Germany is particularly weak as reduced demand from various trading partners has a major impact on its exports. The European policy makers fail to embrace the one option, fiscal spending, that could turn the economy around, and European stocks decline. Politically, Europe moves dangerously toward the right.
  5. Shock and awe no longer works in Japan. The recession which began in the third quarter of 2014 continues throughout 2015 in spite of further fiscal and monetary stimulus and the suspension of the second planned sales tax increase. The Nikkei 225 is flat for the year in yen and down in dollars.
  6. China reports that it is no longer growing at 7% and that more fiscal and monetary stimulus is needed to grow at even 5% and to prevent a hard landing. It also acknowledges that it must rebalance the economy toward the consumer and away from credit-based investing in state-owned enterprises and infrastructure. What money is spent on infrastructure is focused on air, water and ground pollution, not roads and housing. A lower rate of job creation leads to protests but they are contained without excessive violence.
  7. The drop in the price of oil finally has an impact on Iran. The country was dependent on its sale of crude to offset the impact of sanctions. The economic weakness resulting from the unexpected decline in oil finally forces a conciliatory attitude on the part of its nuclear negotiators. Pressure to cease nuclear weapons development comes from the Iranian people as well, as they seek more economic opportunity. An agreement to roll back its weapons program is greeted positively throughout the region and world equity markets rally briefly on the news.
  8. Brent slips into the $40s. The low price of crude oil, which continues throughout the first part of the year, has a major impact on Russia. A peace settlement with Ukraine is signed, giving Eastern Ukraine substantial autonomy but guaranteeing the sovereignty of the rest of the country. President Putin seems to be trying to win back the respect of the international community as the country reels from its economic problems, but the Russian citizenry finally turns on him. His approval rating plummets and he resigns by year-end. During the second half of the year, West Texas Intermediate and Brent crude are both above $70, as emerging market demand continues to increase.
  9. The year-end 2014 meltdown in the high yield market, as a result of the collapse in the price of oil, creates a huge buying opportunity. The spread between high yield and Treasurys is cut in half, and high yield becomes the best performer of the various asset classes as the U.S. economy continues to grow with no recession in sight.
  10. The Republicans decide to position the party as the one that can get something done in Washington. They argue that President Obama was ineffective in his first six years, but when they got control of both the Senate and the House, legislation was passed. The Keystone pipeline finally is approved, as well as minor tax code revisions and even some changes in immigration policy. The Republicans are determined to strengthen their position with Hispanics in 2016. They want desperately to hold the nation’s highest office and they see Jeb Bush as a winner for them.
  11. Added Mr. Wien, "Every year there are always a few Surprises that do not make the Ten either because I do not think they are as relevant as those on the basic list or I am not comfortable with the idea that they are ‘probable.’"

    12. 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."

    Also Rans:

  12. Water becomes the central environmental issue of 2015, eclipsing carbon-caused air pollution. While a shortage of water has always been a potential problem in the Western United States, it becomes a source of considerable tension in India and China, where large parts of the population do not have safe drinking water on a consistent basis.
  13. Internet commerce runs into trouble. Established hotels push legislators to make Airbnb pay the same taxes and fees that they are required to charge customers. Uber is asked by local authorities to prove that its drivers have commercial insurance to protect passengers. The stocks affected decline sharply.
  14. Brazil provides an emerging market favorable surprise. President Dilma Rousseff abandons some of her long-held socialist ideas and moves to the center. She introduces a number of business-friendly policies and the economy improves. It is helped more than it is hurt by the drop in the oil price. Brazil becomes a favorite of emerging market investors once again.
  15. I liked this one, but I didn’t have more than 50% conviction about it. Hillary Clinton decides not to run for President. She fears that Jeb Bush would siphon off some of the votes of Hispanics, who substantially voted for Obama. Many liberals are disenchanted with Clinton and may not vote for her. She wants to be the first woman President but she doesn’t want to lose.
  1. We experience a Dickensian market with the best of times and the worst of times. The worst comes first as geopolitical problems coupled with euphoric extremes lead to a sharp correction of more than 10%. The best then follows with a move to new highs as the Standard & Poor’s 500 approaches a 20% total return by year end.
  2. The U.S. economy finally breaks out of its doldrums. Growth exceeds 3% and the unemployment rate moves toward 6%. Fed tapering proves to be a non-event.
  3. The strength of the U.S. economy relative to Europe and Japan allows the dollar to strengthen. It trades below $1.25 against the euro and buys 120 yen.
  4. Shinzo Abe is the only world leader who understands that Dick Cheney was right when he said that deficits don’t matter. He continues his aggressive fiscal and monetary expansion and the Nikkei 225 rises to 18,000 early in the year, but the increase in the sales tax, the aging population and declining work force finally begin to take their toll and the market suffers a sharp (20%) correction in the second half.
  5. China’s Third Plenum policies to rebalance the economy toward the consumer and away from a dependence on investment spending slow the growth rate to 6% in 2014. Chinese mainland traded equities have another disappointing year. The new leaders emphasize that their program is best for the country in the long run.
  6. Emerging market investing continues to prove treacherous. Strong leadership and growth policies in Mexico and South Korea result in significant appreciation in their equities, but other emerging markets fail to follow their performance.
  7. In spite of increased U.S. production the price of West Texas Intermediate crude exceeds $110. Demand from developing economies continues to outweigh conservation and reduced consumption in the developed world.
  8. The rising standard of living and the shift to more consumer-oriented economies in the emerging markets result in a reversal of the decline in agricultural commodity prices. Corn goes to $5.25 a bushel, wheat to $7.50 and soybeans to $16.00.
  9. The strength in the U.S. economy coupled with somewhat higher inflation causes the yield on the 10-year U.S. Treasury to rise to 4%. Short-term rates stay near zero, but the increase in intermediate-term yields has a negative impact on housing and a positive effect on the dollar.
  10. The Affordable Care Act has a remarkable turnaround. The computer access problems are significantly diminished and younger people begin signing up. Obama’s approval rating rises and in the November elections the Democrats not only retain control of the Senate but even gain seats in the House.
  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.
  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.
  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.
  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.
  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.
  6. The new leaders in China seem determined to implement reforms to root out corruption, to keep the economy growing at 7% 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% in 2013, in contrast with the previous year when Chinese stocks were down and some developing markets, notably India, rose.
  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 $8.00 a bushel, wheat to $9.00 a bushel and cattle to $1.50 a pound.
  8. Although inflation remains tame, the price of gold reaches $1,900 an ounce as central bankers everywhere continue to debase their currencies and the financial markets prove treacherous.
  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.
  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 revenues from citizens who had been evading taxes. European equities, however, decline 10% in sympathy with the U.S. market.
  1. The extraction of oil and gas from shale and rock begins to be a game changer. The price of oil drifts back to $85 a barrel and the United States becomes less dependent on Middle East supply. Deposits in Poland, Ukraine and elsewhere prove promising as well. Increased production from Libya and Iraq and reduced demand resulting from the slowdown in world-wide economic activity contribute to the price decline.
  2. Earnings for American corporations continue to move higher driving the Standard & Poor?s 500 above 1400. Raw material prices continue soft and business leaders successfully adjust to slower economic growth by using technology to reduce the labor and logistical component of goods and services sold; profit margins stay high.
  3. The U.S. economy gets its second wind. Real growth exceeds 3% and the unemployment rate drops below 8%. Recession fears and even ?the new normal? view of prolonged slow growth are called into question. Capital spending, exports and the consumer drive the economy, overcoming fiscal drag. The drop in the price of oil and the rise in the stock market improve both consumer confidence and spending patterns.
  4. The recovering economy and the declining unemployment rate help President Obama convince the voters that he didn?t do such a bad job in his first term after all. He is viewed as a good speaker but a poor leader who is running against Mitt Romney, viewed as uninspired and whose positions on many issues are unclear. Democrats take back the House of Representatives but lose the Senate in an anti-incumbent wave.
  5. Europe finally develops a broad plan to deal with its sovereign debt problem and moves closer to fiscal cohesion. The European Central Bank, the International Monetary Fund, the European Financial Stability Facility and the European Union band together to keep all the countries within the Union and to continue the euro as the Continent?s currency. Greece has a major restructuring of its debt; Spain and Ireland strengthen their finances during the year, but Italy suffers a ?voluntary? restructuring. A meltdown of the banks is avoided, but imposed austerity causes Europe to suffer a recession.
  6. The computer replaces conventional armaments as the principal weapon of terrorists and geopolitical adversaries. Eastern European and Asian hackers invade the data banks of major international financial institutions causing temporary bank closures. An alarmed G-20 meets to address the problem.
  7. Concerned over rapid money supply growth in the developed world, investors buy the currencies of countries that seem to be managing their economies sensibly. Scandinavian currencies, the Australian and Singapore dollar and the Korean won benefit.
  8. Congress decides its dysfunctionality is harmful to both parties and acts before the November election to deal with the failure of the Super Committee to develop a program to reduce the U.S. budget deficit by $1.2 trillion over ten years. Both defense and Medicare are cut significantly; subsidies for agriculture are reduced and tax deductions for oil, gas and real estate partnerships are modified. Obama pledges to let some aspects of the Bush tax cut program continue if he is reelected.
  9. The Arab Spring finally overcomes Bashar al-Assad and his family?s rule over Syria ends. While Assad?s fall might have been inevitable, it has important ripple effects throughout the region weakening Hamas, Hezbollah and further isolating Iran.
  10. After two years of poor stock market performance while their economies came through with high single-digit real growth the emerging markets finally have a good year. Growth slows somewhat but favorable valuations enable China, India and Brazil indexes to appreciate 15-20%.

    11. 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."

    Also Rans:

  11. Housing starts to pick up significantly. The strength in the economy coupled with record affordability encourages the consumer to come back into the market and make long term commitments. The overhang of vacant homes begins to be absorbed.
  12. The yield on the 10-year U.S. Treasury note rises to 4% as China continues to invest heavily in hard assets and raw materials and pulls back from putting reserves into the bonds of developed nations.
  13. After correcting sharply toward the end of 2011 gold rebounds to $1800 during the year. Accommodative monetary policies throughout the developed world cause a renewed migration to hard assets by individual investors and sovereign wealth funds. Silver benefits also, rising to $40.
  14. Fiscal discipline at the state and local level allows the drop in yields for municipal bonds to continue.
  1. The continuation of the Bush tax cuts coupled with the extension of unemployment benefits has put all working Americans in a better mood. Real Gross Domestic Product rises close to 5% in 2011 driven by improved trade and capital spending in addition to stronger retail sales. Unemployment drops below 9%.
  2. The prospect of increasing Federal budget deficits and rising government debt finally begins to weigh on the bond market. The yield on the 10-year U.S. Treasury approaches 5% as foreign investors become more demanding. Spreads with corporate fixed income securities narrow.
  3. Encouraged by renewed economic momentum the Standard & Poor’s 500 rises close to its old high of 1500. A broad range of sectors participate, but telecommunications and utilities lag. With earnings improving, valuations seem low and individual investors return to equities for the first time since the financial crisis. Merger and acquisition activity becomes intense and the market reaches a blow-off euphoria. Stocks correct in the second half as interest rates rise.
  4. Although inflation remains benign, the price of gold rises above $1600 as investors across the world place more of their assets in something they consider "real." Sovereign wealth funds of countries with significant dollar reserves also become big buyers. Hedge funds keep thinking the price rise is becoming parabolic and sell their positions and some even short the metal but gold keeps climbing and they scramble back in.
  5. Worried about inflation and excessive growth, the Chinese decide to use their currency as a policy tool. They manage the value of the renminbi aggressively to keep the growth of the economy below 10% and to prevent consumer prices from increasing above the 4%–5% range. The move is viewed as a precursor to the world-wide adoption of a basket including the renminbi as an alternative to the use of the dollar as the principal reserve currency.
  6. Rising standards of living in the developing world seriously increase the demand for agricultural commodities. The price of corn rises to $8.00, wheat to $10.00 and soybeans to $16.00. Commodities become a component of more institutional portfolios.
  7. The housing situation improves. Although the inventory of unsold homes remains high, the oversupply is drawn down substantially, contrasting with an increase in 2010. The Case-Shiller gradually heads higher and housing starts exceed 600,000.
  8. Continuing demand from the developing world and a failure to bring onstream new supply causes the price of oil to rise to $115 per barrel. The higher price at the pump fails to discourage driving, increase sales of hybrid vehicles or cause Congress to initiate conservation measures.
  9. Frustrated by the lack of progress against the Taliban and the corruption of the Karzai government, President Obama concludes that whenever American troops return home, Afghanistan will once again become a tribal state ruled by warlords. He accelerates the withdrawal of most military personnel to the end of 2011. Coupled with the pullout of forces in Iraq, this will leave the Middle East without a major Western presence in the face of rising fears of terrorism.
  10. Under duress Angela Merkel leads the way in European financial reform. The weaker countries, having pledged to cut their budget deficits in half by 2014, are provided additional transitional aid by the European Union (with Germany’s backing) and the International Monetary Fund as long as they implement their austerity programs, increase some taxes and still show modest growth. The European financial crisis becomes less of a concern. The policies put in place prove psychologically satisfying to the financial markets but harmful in the longer term because they are palliative and do not represent solutions.

    11. 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."

    Also Rans:

  11. While Afghanistan and Iraq cool down as trouble spots, Pakistan and North Korea flare up. The former continues to be a troublesome breeding ground for terrorists and the latter initiates further hostile attacks on South Korea. China does not become involved in a major way and the international community seems helpless.
  12. The broad international sanctions on Iran finally begin to work. Mahmoud Ahmadinejad enters into negotiations to scale back the country’s nuclear weapons development program in exchange for financial aid and foreign investment. Pressure from the country’s youth to provide more economic opportunity is the key factor in the change in policy. Talk about bombing by Israel or the U.S. subsides.
  13. Rising interest rates and a strong economy allow the dollar to strengthen against the euro and the yen. Although the European financial crisis abates as austerity programs and higher taxes are put in place and Japan avoids falling back into recession, America becomes the developed market of choice for global investors.
  14. Sarah Palin announces she will seek the Republican nomination for President amidst the cheers of Tea Party supporters. More moderate Republicans fear her candidacy will diminish the chances of their party winning in 2012 and try to blunt her efforts. Rick Perry, governor of Texas becomes a contender. Mike Bloomberg is mentioned. On the Democratic side, liberals feel Obama has betrayed them and desperately try to find a challenger. With the economy improving the prospect of a second term for Obama becomes more likely.
  15. The Russian government decides it is the laggard of the emerging markets and steps up its efforts to become more investor friendly. The Kremlin agrees to further nuclear weapons reduction and provides assurance to companies willing to invest there that the rule of law will prevail. The Russian equity market soars.
  16. Laws related to marijuana usage are liberalized in more states. Recognizing that the drug may not be addictive, the public’s attitudes have evolved over the last thirty years, and this, along with a desire to alleviate the over-crowding of jails, causes state legislatures to take a more liberal position. Drug abuse groups are outraged.
  17. Infrastructure problems in the United State become serious. New York subways are inoperative for days as a result of an electrical problem in the signal system. Gridlock snarls Los Angeles freeways, and to encourage cooperative commuting, high-occupancy vehicles are required to carry three or more people. State and local governments complain they lack the funds to deal with the problems and Washington refuses to help.
  18. A major state fails to pay interest on a municipal bond issue because of a lack of funds, causing havoc in the municipal bond market.
  19. In spite of fears of tenth anniversary terrorist attacks, 9/11/11 becomes a peaceful non-event because of excellent intelligence and surveillance.
  20. While climate change activists remain shrill, the issue recedes in importance in the United States. Cold weather prevails during the winter and the summer heat is not oppressive. Support increases for a broader use of natural gas by utilities and public transportation and its price rises to $6.00 per mcf. In Europe and Asia however, environmental initiatives continue to move ahead.