Forecaster: Saddam, Greenspan to Go in '03
By Haitham Haddadin
Monday January 6, 3:26 pm ET
NEW YORK (Reuters) - Iraqi President Saddam Hussein steps down, Federal Reserve Chairman Alan Greenspan resigns. That's what's in store in 2003, Morgan Stanley chief U.S. strategist Byron Wien said on Monday in his yearly forecast.
"With massive U.S. military force at his borders and United Nations inspectors increasing the pressure, Saddam Hussein decides to step down and seek asylum in Libya rather than watch the slaughter of thousands of his people," Wien wrote in his traditional forecast, which he calls the "10 surprises."
Wien said Wall Street will put in a stellar performance in the first six months of 2003 and the U.S. economy will grow more than expected.
Wien's surprises of 2003:
-- U.S. stock market surges 25 percent plus in first half.
-- U.S. economy has 4 percent real growth for the year.
-- Japan's Nikkei 225 (^N225 - News) soars to 11,000; Europe lags.
-- Some states threaten to leave European Monetary Union.
-- High-tech firms pay shareholders dividends from hoards.
-- Housing bubble doesn't burst; it grows larger.
-- No war in Middle East or Asia; oil at $30 a barrel.
-- Significant biotech products receive U.S. approval.
-- Brazil stocks lead Latin America to a market recovery.
-- Hillary Clinton announces run for president in 2004.
Commenting on the last forecast, Wien wrote, "George W. Bush is said to be looking forward to the campaign so that a Bush can finally have a victory over a Clinton."
Among housing sector stocks he sees as strong performers, Wien mentioned Lennar Corp. (NYSE:LEN - News) and Centex Corp. (NYSE:CTX - News)
Home prices, he said, will rise in the Rust Belt while remaining elevated on the two coasts.
The pundit, whose reports are peppered with off-beat and witty remarks, said Greenspan will resign as Fed chairman, "saying he isn't up to handling yet another bubble."
Wien made the same prediction on Greenspan last year.
The dollar will draw support from stronger-than-expected earnings from corporate America and from a recognition of America's economic, political and military strength.
"Foreign capital inflows surge and individual investors start to buy again," Wien said.
The U.S. economy confounds double-dip recession and deflation worrywarts, he said, as consumers hold their own and capital spending rebounds.
But inflation rises and the Fed hikes short-term rates 100 basis points in the second half of the year.
The U.S. stock market comes under pressure in the second half of 2003 but still closes strongly positive for the year.
On Japan, Wien said the country seems serious about implementing financial reforms. Government support helps the banks face up to nonperforming loans, import barriers are lifted, profits begin to recover and the Nikkei 225 climbs to 11,000. The index closed at 8,713 on Monday.
Wien hit a bull's eye in 2002 when he forecast at the start of the year that the Nikkei, which stood at about 10,800 points then, would drop to 8,000. It fell to 8,197, in October.
But the pundit also missed last year when he said that Japanese Prime Minister Junichiro Koizumi would resign as Japan's recession continues. That prediction did not pan out.
In his latest forecasts, Wien said he expects Koizumi to propose an historic free-trade agreement with the new Chinese leadership.
But European equity markets badly lag the United States and Japan, Wien said.
Starting with France, he expects several member countries to lose confidence in the European Monetary Union and threaten to pull out. German Chancellor Gerhard Schroeder resigns.
A change in U.S. taxation of dividends encourages some tech companies to start making quarterly payouts to shareholders from their huge cash hoards.
NO MAJOR BATTLE
Wien said North Korean leader Kim Jong-il, after talks with U.S. and U.N. representatives, agrees to stop converting spent uranium fuel rods into weapons-grade plutonium.
"We get through the year without a major military battle in the Middle East or Asia, increasing investor confidence and reducing the risk premium for equities," he noted.
Oil, however, remains in tight supply and hovers at $30 a barrel. That's why oil service stocks Schlumberger Ltd. (NYSE:SLB - News), Halliburton Co. (NYSE:HAL - News), and BJ Services (NYSE:BJS - News) will rise sharply, he said.
The battered biotechnology group sees a revival. After a weak showing last year, Food and Drug Administration approval for some biotech products boosts the sector, said Wien, singling out sector leaders Amgen (NasdaqNM:AMGN - News) and Gilead Sciences (NasdaqNM:GILD - News) as top performers.
The recovery in the Brazilian stock market, which will lead Latin America, will be fueled by tighter fiscal control, higher agricultural commodity prices, and the U.S. recovery.
biz.yahoo.com |
