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Every year, Byron Wien, Morgan Stanley’s senior strategist, makes some bold predictions. His ground rules are that his predictions be of things most pundits expect not to happen, but that he views as a better than 50-50 shot.
His past record has been quite good. Last year, he accurately predicted that no major terrorist events would succeed in the U.S., that bonds would beat stocks, that stocks would decline for the third straight year, and that Japan’s stock market would continue its tailspin.
On the other hand, he wrongly forecast that telecom equipment makers JDS Uniphase, Lucent and Nortel would rebound and that Alan Greenspan would resign.
In short, crystal ball gazing has to be taken with a large grain of salt. Nevertheless, Wien has a good enough record that his newest batch of predictions -- he calls them "The Surprises of 2003" -- should be taken seriously.
The top 10
1. The U.S. stock market surges more 25% in the first half of the year as the dollar strengthens, bringing in foreign investors.
2. The economy exhibits robust 4% real growth as consumers keep spending and business spending picks up. Inflation ticks higher, causing the Fed to raise short rates a full percentage point. Long Treasuries rise to 5.5%, and stocks come under pressure in the second half but still finish sharply higher for the year.
3. Japan finally implements serious reform, and its stock market rockets ahead. Asia replaces the U.S. as the world’s growth engine.
4. European stock markets do badly as some countries lose confidence in the European Monetary Union.
5. Cisco (MSFT) in paying dividends as taxation is eased.
6. Housing prices rise further. Lennar (CTX) are strong performers.
7. Saddam Hussein resigns, averting war, and North Korea agrees to stop making nuclear weapons. Oil supplies remain tight, though. BJ Services (SLB) do well.
8. Amgen (GILD) lead a strong biotech sector as key drugs win FDA approval.
9. Brazil leads Latin America to a stock market recovery.
10. Hillary Clinton seeks the Democratic presidential nomination.
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