Byron Wien, vice chairman of the group’s private wealth solutions division, believes that US stocks are “fully priced” as the S & P 500 index approaches historical highs. He advised investors to buy gold to hedge against further dollar weakness.
Wayne said on Wednesday that the U.S. economy is relying on policy support to maintain its momentum, which is far from the full recovery, and the current economic activity is only about a quarter of the level in 2019.
this means that the US dollar may continue to weaken. Wayne predicts that the US fiscal deficit will increase to 20% of GDP, and the size of the Federal Reserve’s balance sheet will expand from the current $7 trillion to $9 trillion. But he did not give a timetable for that prediction.
at the same time, he said the rally in US stocks from March lows has been dominated by technology stocks and other growth companies, some of which have valuations that reflect earnings two years later.
Wayne said: “when the bear market is over and the recession is over, I may see the S & P 500 higher than it is today, but basically I think it is fully priced at the moment.”
Wayne’s worries about the US dollar are partly due to the heavy fiscal spending of the United States and the poor response to the epidemic, which has a slower recovery than Asia and Europe. This, he said, has cast doubt on the idea of an “American exception.”.
since 1986, the 87 year old former chief economist of Morgan Stanley has published a “top 10 surprises” forecast that has attracted the attention of wall street every year. At the beginning of this year, he predicted that the S & P 500 would rise above 3500 points sometime this year, as slower economic growth prompted the fed to cut interest rates.
at present, the S & P 500 has rebounded 50% from the bear market low in March, which is only about 10 points away from the record high of 3386.15 set in February. Despite the collapse of corporate profits, the U.S. stock market continued to rise, largely thanks to the resilience of Internet and software companies whose products cater to the needs of social distance during the outbreak. The S & P 500 is now trading at 26 times expected earnings, the highest level in 20 years.
the US dollar has fallen 9% against a basket of currencies from its march high. Gold, meanwhile, is up 28% this year, reaching a record $2063.54 an ounce earlier this month.
Wayne said: “the dollar has weakened, and one way to protect yourself from this is to hold gold, which has been a good asset in the portfolio this year. I have some gold in my portfolio and I think it is reasonable for individual investors to hold some gold positions. “