Pequot’s Wien Predicts Rallies in Stocks, Oil, Gold...Way to be Byron Wien...

Pequot’s Wien Predicts Rallies in Stocks, Oil, Gold (Update1)
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By Elizabeth Stanton

Jan. 5 (Bloomberg) -- Byron Wien, the investment strategist who predicted a recession would drive U.S. stocks lower last year, says the Standard & Poor’s 500 Index will rebound 33 percent in 2009 as the economy recovers.

Wien, the 75-year-old chief market strategist at Pequot Capital Management Inc., forecast the S&P 500 will rise to 1,200 in his 24th annual “10 Surprises” list. He also predicted gold will climb to a record $1,200 an ounce and oil will advance to $80 a barrel.

“In anticipation of a second-half recovery in the U.S. economy, the market improves from a base of investor despondency and hedge fund and mutual fund withdrawals,” Wien wrote. “The mantra changes from ‘fortunes have been lost’ to ‘fortunes can still be made.’”

A year ago, Wien’s predictions included a 10 percent decline for the S&P 500 and onset of the first U.S. recession since 2001. The main benchmark for American equities sank 38 percent, the most since 1937, as financial shares collapsed and energy and metal producers tumbled. The National Bureau of Economic Research said last month that a recession began in December 2007.

Wien, a former senior market strategist at Morgan Stanley who joined Pequot in December 2005, says more than half of his predictions have come true in the past.

Right, Wrong

Wall Street strategists tracked by Bloomberg predict the S&P 500 will increase 17 percent this year, the biggest annual increase since 2003. Wien’s projection for 1,200 is eclipsed only by David Bianco of UBS AG, who sees the index climbing to 1,300.

Pequot, the Westport, Connecticut-based hedge-fund firm run by Arthur Samberg, managed about $4.3 billion as of Nov. 30, according to its Web site.

Incorrect predictions on last year’s list included a rally in the dollar during the first half of the year and weakness in the second half. The U.S. currency in fact slipped in the first half and strengthening during the second half.

Similarly, Wien forecast oil would fall early in the year and gain in the second half. Crude oil futures rose to a record $145.29 a barrel in July, then dropped as much as 77 percent to $33.87 on Dec. 19.

For 2009, Wien predicts “a serious downward slide” for the U.S. currency as a result of “huge borrowing” by the Treasury to finance bailout measures. The dollar may weaken to a record $1.65 per euro and 75 yen, he said. The 10-year Treasury yield may climb to 4 percent as investors begin to fear inflation instead of deflation.

China Rally

Wien’s other predictions for 2009 included a rebound in China’s economy and stock market, federal assistance for municipalities after threats of bankruptcy by states including New York because of falling tax revenue, and a bottom for housing starts in the fall.

At its lowest closing level of 2008 on Nov. 20, the S&P 500 was down 49 percent for the year and 52 percent from its Oct. 9, 2007, record of 1,565.15. It rebounded as much as 24 percent on speculation government spending will curtail the recession, aided by a drop in interest rates as the Federal Reserve lowered the benchmark rate to a range of zero percent to 0.25 percent.

The S&P 500 fell 0.3 percent to 929.61 as of 12:58 p.m. in New York as concern that a slump in corporate profits will stretch into 2009 overshadowed speculation the government will revive the economy with tax cuts.

Wien last year correctly predicted Barack Obama would win the U.S. presidential election on Nov. 4 and that the Democratic Party would win majorities in both houses of Congress.