Byron | Inspiration

The week that was: Inspiration from Byron Wien’s 10 market surprises 

Earlier this week, I had a conversation with UK-based fund manager Sean Peche where he touched on highly respected investor Byron Wien’s top 10 market surprises. Wien is ex-Morgan Stanley, Chairman of Blackstone Advisory Partners. Inspired by our discussion, I decided to forecast my own market surprises for the upcoming year, with a focus on South Africa. Although many of Wien’s forecasts were considered long shots at the time, his ‘surprises’ have been accurate enough to retain interest for 35 years; his predictions were first published in 1986. 

Wien’s market surprises for 2021 were, for the most part, extremely accurate. In the interview below, he reveals to Bloomberg his 10 surprises for 2021, most of which came true. I’ve also added Peche’s surprises for 2022 with a particular global focus. 

10/

– ps. there’s not much in it ytd

5. Small caps beat large-caps & Europe beats US

6. Passives suffer outflows

7. Bitcoin falls 50% to $25000

8. Inflation falls to 2%

9. Dollar falls 10%

10. Oil hits $100

Now, what if just a few of these happen?

— Sean Peche (@SeanPeche) December 8, 2021

Here, I’ve penned my surprises for 2022. Take it or leave it, speculation is not knowledge…

The JSE All Share Index hits 90,000 (currently 72,000). Led by multinational heavyweights, the large-cap heavyweights will continue to benefit from a global economic recovery, benefited by a weaker rand.

US dollar/rand drifts to R20 (currently R16). The reasons here are two-fold: the local economic data suggests no signposts of economic recovery and I believe we’ll see a firmer dollar across the board in 2022. 

South African Reserve Bank raises rates by 50 bps through 2022 (100 bps increase expected); lack of reform and weak economic data will mean Lesetja Kganyago will have to be accommodative in his policy … business and consumer confidence depends on it. 

Inflation (local and global) stays elevated, driven by a higher oil price. The oil price thesis is simple; gross underinvestment in oil and gas in the last few years has led to a supply/demand imbalance. A shortage of supply and excess demand means higher prices (simple economics). Although we’ve seen commodity prices wane and supply chain disruptions ease as the pandemic rolls over, higher oil prices will keep inflation elevated. 

MSCI World Energy Index will increase 30% in 2021 and rank among the best performing sectors in 2022. As highlighted above, in my times of reconciliation, I revert back to the father of economics, Adam Smith, to guide my investment recommendations. When supply is muted and demand is abundant, the price goes up. My conviction in this respect remains steadfast. 

MSCI Global Alternative Energy Index to fall 30% in 2021; the need to transition to a green economy cannot be debated but unfortunately, at this point, renewables cannot generate the quantum of power needed to keep the lights on. Simply put, there’s a mismatch between fundamentals and valuation, created by too much excitement and enthusiasm. I think this party will struggle to keep the lights on in 2022. 

Bitcoin goes past $100,000 ($49,000 currently).

Gold passes $2,000 dollars an ounce as inflation worries linger.

JSE beats S&P 500 in 2022.

South Africa’s GDP growth is muted (2.1% median forecast).

Lots to digest. Plenty to ponder. Roll on the new week…

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