Politics and the Biden Administration

The U.S. economy is slowly beginning to overcome the ramifications and repercussions of the pandemic as people return to work. Mr. Wien believes the US$1.9 trillion relief program will surely impact the economy and its repercussions must be monitored closely.

The equity market is vulnerable to too much speculation, but he thinks this will be a very good year. There should be a recovery by summer and a return to normal life by autumn to a certain extent.

Byron foresees that Biden will focus on the environment and the economy, while corporate and individual taxes will be raised which will reflect badly on the equity market. But the equity market in the U.S. and around the world should end the year higher. Equities should outperform bonds. Unlike growth equities, sovereign bonds are unattractive. Value and small capitalization stocks should perform well. Byron is positive on emerging markets, especially China and India which offer investors ample opportunities.

Infrastructure

With a US$2 trillion infrastructure package proposed by Biden and the US$1.9 trillion relief program, the US economy may overheat, leading to inflation.

America is indeed in dire need of infrastructure resurrection on all levels, but it is not be the first priority.

Oil

In one of his 2021 surprises, Byron had predicted the oil prices will rise to US$65 per barrel with economic recovery. Oil consumption was expected to rise as manufacturing and services re-bounce, travelling and daily commute resumes, and more people get vaccinated.

Outlook on Inflation:

Mr. Wien expressed some worry over inflation as he predicted that 10-year Treasury yields would rise 2% and maybe above this year. Consumer prices are already rising as more vaccinated people resume activity. However, he does not foresee a viral inflation similar to the one in the 1970s.

Medical outlook, vaccines, and mutation:

Byron expected five to 10 vaccines to be effective in 2021. Thus far, Pfizer, Moderna and Johnson & Johnson vaccines have all proven effective, and more are underway. Should COVID-19 variants become a problem, boosters are the solution, he says. As more nations take control over COVID-19, Mr. Wien expects life to return slowly to normal around April in the USA, and by summer people will resume their normal behavior. By fall, schools will open for in-classroom learning; sports events will return; and dine-in restaurants will increase capacity to 50 or 75%. This shall certainly reflect positively on the economy everywhere.

As for the rest of the world, Europe will be back to normal by fall, but he could not comment on the Middle East.

US - China relationship:

Byron Wien believes it’s a dangerous situation when the two biggest economies in the world are at war. During the Trump administration, the situation worsened. The numbers show that China has moved forward alone without the US on their camp, but it is in the best interest of both parties to have a favorable working relationship. He foresees progress by the Biden administration to begin a workable relationship between the two countries.

Artificial Intelligence, 5G, Robotics, and Semiconductor Chips:

America has been a leader in fields such as aircraft, thanks to Boeing, and in semiconductors, which is now led by Taiwan. Byron believes the U.S. must regain its leadership and its competitiveness so it would not depend on overseas suppliers for every technology product. e stated that America cannot relinquish its leadership and needs political support and research to support this.

Tesla and Electric Vehicles:

Mr. Wien predicts that electric vehicles will be widely used by 2035, but he’s skeptical about the timing of self-driving cars. He also believes fossil fuel cars will still be driven and the electricity used to charge electric vehicles will be generated by fossil fuel. Due to the pandemic, change is coming and he foresees less time spent in offices and retail shops, which has implications on cities as the need for office space and physical retail shops decreases. Investors should look for favorable trends in real estate, manufacturing, services, and government.

Bitcoin, Cryptocurrencies and Digital Currencies:

The biggest detractor for Bitcoins is their volatility. Performance needs to be calmer to attract investors.  At this stage, it is viewed more as a store value than a transactional instrument. After looking into this matter, he has concluded that it should be part of an institutional portfolio.

Digital Penetration into Financial Services and Other Sectors

Byron states that digital penetration will rise steadily. The key is to control it then curb it when it gets out of proportion. Consequently, regulatory bodies and authorities must play a crucial role. As wealth grows, demand for quality investment management is growing and individual judgement will play a role in making the choice.

Portfolio Shifts for 2021

Some cyclical investments will perform well while others lag as the price of oil rises and technology stocks like Facebook and Google are fully priced. 

Byron foresees 2% growth for the foreseeable future and expects this cycle to be a long one. He has a negative view on sovereign bonds but is optimistic on mortgages.

Before closing, David Darst, who moderated the webinar, asked Mr. Wien about his mentors. He spoke of a long-standing relationship with George Soros, a mentor with whom he wrote a book in 1995-1996 and meets frequently.  He also mentioned Edgar de Picciotto, head of Union Bancaire Privée, and strategist Barton Biggs.

When asked about advice he would give young people who enter the industry today, Mr. Wien advises them to associate themselves with a growth business. For example, money management is a growth business and private equity firms will continue to thrive. Businesses with high profit margins can pay you well and finance their own growth internally. So look for growth and profit margins. Seek Internet-related investments. The successful ones will be very rewarding.  Work hard, get the best education, and associate yourself with the most inspiring professors.

Be careful who you marry. Your life partner is a very important component of success. The job you pick is the second most important.  He finally wished them luck, as it often proves instrumental in one’s success.