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. Byron 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 that will reflect badly on the equity market. But the equity market in the U.S. and around the world should end the year higher. He predicts equities would outperform bonds and finds sovereign bonds unattractive. Value and small-capitalization stocks would perform well, and he 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 the first priority, in his opinion.

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, traveling and daily commute resume, and more people get vaccinated.

Outlook on Inflation

Byron expressed some worry over inflation as he predicted that the 10-year Treasury yields would rise 2% and may be above this year. Consumer prices are already rising as more vaccinated people resume activity. However, he does not foresee viral inflation similar to the one in the '70s.

Medical Outlook, Vaccines, and Mutation

Byron expected five to 10 vaccines to be rolled out with positive outcomes in 2021. Thus far, Pfizer, Moderna and Johnson & Johnson vaccines have shown measurable effectiveness, and more are underway. Should COVID-19 variants become a problem, boosters will be the solution, according to him. As more nations take control over COVID-19, Byron expects life to slowly return to the 'previous normal' around April in the USA, and people will resume their normal habits by summer. He predicts that schools will open for in-classroom learning by fall this year; sports events will return, just as dining 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 considers it a dangerous situation when the two biggest economies in the world are at war, as he believes that the relationship between China and the US has worsened. The numbers show that China has moved forward alone without the US on their camp, but he strongly supports a favorable working relationship for both parties' best interest. He foresees progress with the Biden administration's efforts to rekindle a workable relationship between the two countries.

Artificial Intelligence, 5G, Robotics, and Semiconductor Chips

The US has been the leader in the fields such as aircraft (thanks to Boeing) and in semiconductors - fields that are now led by Taiwan, in his view. Byron believes that the US must work on its competitiveness so it would not depend on overseas suppliers for every technology product, and stated its need for political support and research across the globe.

Tesla and Electric Vehicles

Byron anticipates that electric vehicles will be widely used by 2035, although he’s still skeptical about the timing for 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. He recommends to investors to look for favorable trends in real estate, manufacturing, services, and government.

Bitcoin, Cryptocurrencies and Digital Currencies

According to Byron, the biggest detractor for Bitcoins is their volatility, and he thinks their performance needs to be calmer to attract investors.  At this stage, he views it more as a store value rather than a transactional instrument. After spending considerable time analyzing these digital currencies, he concluded that they should be part of an institutional portfolio.

Digital Penetration into Financial Services and Other Sectors

Byron states that digital penetration will rise steadily, and 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 judgment will play a role in making the choice, according to his prediction.

Portfolio Shifts for 2021

Byron foresees 2% growth for the foreseeable future and expects this cycle to be a long one. He has a negative view of sovereign bonds but is optimistic about mortgages. Some cyclical investments will perform well, in his assessment, while others will lag as the price of oil rises and technology stocks like Facebook and Google are fully priced. 

Before closing, David asked Byron about his mentors, who then spoke of his long-standing relationship with George Soros, a mentor with whom he wrote a book in 1995-1996. He also mentioned Edgar de Picciotto, head of Union Bancaire Privée, and strategist Barton Biggs. As for advice to young people embarking on their journey in the finance industry today, Byron recommends associating with a growth business - for example, money management - as private equity firms will continue to thrive. He strongly believes that businesses with high-profit margins can offer advantages not just through rewarding compensations, but can also finance their own growth internally. He also suggests seeking internet-related investments where he believes successful ones will be very rewarding. Aside from working hard, getting the best education, and associating oneself with the most inspiring professors, he quite endearingly emphasized the significance of a life partner's role in the success journey of an individual, while the choice of job only comes next.

Byron Wien is the Vice Chairman of Private Wealth Solutions at Blackstone. The webinar was held in collaboration with The Family Office Bsc (C).