Veteran Wall Street strategist Byron Wien, the vice chairman of Blackstone’s (BX) private wealth solutions group, things the days of robust stock market returns are a thing of the past.
Wien, 85, is optimistic that the market will go higher this year, but the “triumphant” equity returns, meaning the double-digit gains, are over. His current target for the S&P at the end of the year is 3,000.
“We’ve had a lot of years of double-digit returns,” Wien said during a webcast on Thursday. “What we are saying now is we are not going to have that going forward.”
One of the reasons for the double-digit returns in recent years was that we were in a 30-year-long bond bull market and interest rates were coming down. With rates on the rise, big returns should not be expected. Instead, this market will be dependent on earnings and dividends to produce stock returns.
What’s more, investors should expect dips ahead, presenting buying opportunities.
Earlier this year, Wien said that he expected that the market would experience a correction. A 12% correction took place in February.
Wien expects that there will be “another test of the February lows” ahead for the market. He pointed out that investors are “too optimistic” and “something is going to change that.”
“I don’t think we’ve really purged the euphoria to the extent we need to do it in order to lay a platform for the next rise in the market.”
Some significant developments, including the renegotiation of NAFTA, the conflict in Syria and tensions in North Korea, could impact the markets.
“What the market is saying is, ‘All of those things are going to go the right way. You don’t have to worry,’” he said. “If just one of those things goes wrong, it will have an impact on the market. That’s why I’m worried we are going to test the February lows.”
Wien still thinks that the S&P will be above 3,000 at some point, but he doesn’t think it’s going “straight up” from there.
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.