Hedge fund manager takes up the 'ten surprise' mantle. His call: Apple stock will slump, S&P will sputter and oil will surge

By Steve Goldstein

Critical information for the U.S. trading day

Byron Wien, a respected market strategist at Morgan Stanley and then Blackstone, died this year at the age of 90. His "10 surprises" column was awaited annually, not so much for their prescience but for being provocative, stirring outside the box thinking.

From the archive: This investing legend has been predicting surprises for the last 37 years. Here's how he did last year - and what he's forecasting now

Doug Kass, the hedge-fund manager at Seabreeze Partners Management and a friend of Wien's, has decided to take up that mantle, including Wien's brevity and style. Here are some of the most notable (and printable) of his predictions:

Kass - who was bullish for 2023, so not a permabear by any stretch - says the S&P 500 SPX will never exceed 4,900, and will drop all the way under 4,100 in an oil-price scare as foreign powers step up military confrontations. Even worse will be the Nasdaq COMP, which he says may drop as much as 20%, while the small-cap Russell 2000 RUT also loses ground as companies battle debt and operating headwinds. The oil spike obviously will be good news for the likes of Exxon Mobil (XOM), Occidental Petroleum (OXY) and Chevron (CVX).

Central to his S&P and Nasdaq decline view is that Apple (AAPL) will suffer "a large percentage loss" due to trade tension with China. He says overall revenue for Apple will decline again next year. (Analysts are expecting 3% revenue growth). The silver lining, he says, is that Berkshire Hathaway (BRK.B) will double down and raise its position to nearly 2 billion shares (currently, 916 million).

Kass says banks will struggle as commercial real estate fails to recover in price, while what he calls Wall Street's "most vicious vulture" - private equity - will get torn to shreds due to a slowing global economy and loan rate resets.

He says Jamie Dimon will finally leave JPMorgan Chase (JPM), joining either a Haley - or even more unlikely, a Whitmer - administration as Treasury secretary. He'll be replaced at the bank by Marianne Lake, the co-CEO of consumer & community banking.

Kass includes a few "also ran" ideas, also in the spirit of Wien, either because they were less relevant or less probable. Kass's also rans include: Tiger Woods wins a major title, Goldman chief David Solomon resigns and is replaced by rising star Ericka Leslie, and zero-day-to-expiration options cause a 3% to 5% flash crash on an expiration day during the summer.

The market

U.S. stock futures (ES00) (NQ00) were higher, while the yield on the 10-year Treasury BX:TMUBMUSD10Y slipped 5 basis points to 3.90%. The dollar surged against the Japanese yen (USDJPY) as the Bank of Japan opted to stay with negative interest rates.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              4,740.56   2.56%   4.25%   23.47%  24.17% 
   Nasdaq Composite                                                     14,905.19  3.28%   4.34%   42.41%  41.33% 
   10 year Treasury                                                     3.909%     -29.46  -48.47  2.94    21.90 
   Gold                                                                 $2,039.20  2.08%   2.98%   11.43%  13.49% 
   Oil                                                                  $72.79     1.95%   -6.19%  -9.59%  -4.05% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Alphabet's (GOOGL) Google agreed to pay $700 million in a Play Store settlement.

Tesla (TSLA) will give 10% raises to hourly workers at its Nevada gigafactory, a CNBC report said.

An activist investor, Cevian Capital, has taken a stake in UBS (UBS), the Swiss banking giant that recently bought Credit Suisse.

Continuing the back and forth after Fed Chair Jerome Powell's press conference last week, San Francisco Fed President Mary Daly said rate cuts could be needed next year to prevent overtightening.

U.S. housing starts jumped 14.8% in November to the highest level since May.

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Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   GME     GameStop 
   NIO     Nio 
   NVDA    Nvidia 
   AAPL    Apple 
   AMC     AMC Entertainment 
   MARA    Marathon Digital 
   PLTR    Palantir Technologies 
   AMD     Advanced Micro Devices 
   MSFT    Microsoft 

The chart

This chart plots U.S. equity and bond returns all the way back to 1800. Henry Neville, s a multi-asset portfolio manager at Man Solutions, expects 2024's dot to be in the bottom right quadrant, forecasting a modest decline in the S&P 500 due to earnings missing analyst estimates and a similarly modest gain in bonds. Perhaps more notable on a day the Bank of Japan didn't act was his view that the yen is a cheap hedge against equity gap risk, as are Brent oil futures and the VIX.

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-Steve Goldstein

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12-19-23 0900ET

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