For the 36th consecutive year, Blackstone vice chairman Byron Wien has issued his predictions for the top 10 surprises for 2021, and this time he has collaborated with Joe Zidle, chief investment strategist of private wealth solutions.

Wien defines a “surprise” as an event that the average investor would only assign a one-in-three chance of coming to pass, but which he believes is “probable,” having a better than 50 percent likelihood of happening. Wien began the tradition in 1986 when he was the chief U.S. investment strategist at Morgan Stanley. He joined Blackstone in September 2009 as a senior adviser to both the firm and its clients in analyzing economic, political, market and social trends. In 2018, Zidle joined Wien in the development of the 10 surprises list.

Wien and Zidle agreed on the following 10 surprises of 2021:

1. Former President Trump starts his own television network and also plans his 2024 campaign. His lead program is The Chief, during which he does weekly interviews with heads of state and CEOs with management styles like his own. His virtual interview with Vladimir Putin draws more viewers than any television program in history.
2. Despite the hostile rhetoric from both sides during the U.S. presidential campaign, President Biden begins to restore a constructive diplomatic and trade relationship with China.
3. The success of between five and 10 vaccines, together with an improvement in therapeutics, allows the United States to return to some form of “normalcy” by Memorial Day 2021. People are generally required to show proof of vaccination before boarding airplanes and attending theaters, movies, sporting events and other large gatherings. The Summer Olympics, postponed last year, are held in July with spectators allowed to physically attend.
4. The Justice Department softens its case against Google and Facebook, persuaded by the argument that the consumer actually benefits from the services provided by these companies. Certain divestitures are proposed and surveillance restrictions are applied, but the broad effort to break them up loses support, except in Europe.
5. The economy develops momentum on its own because of pent-up demand, and depressed hospitality and airline stocks become strong performers. Fiscal and monetary policy remain historically accommodative. Nominal economic growth for the full year exceeds 6 percent and the unemployment rate falls to 5 percent. We begin the longest economic cycle in history, surpassing the cycle that lasted from 2010 to 2020.
6. The Federal Reserve and the U.S. Treasury openly embrace modern monetary theory as their accommodative policies continue. As long as growth exceeds the rate of inflation, deficits don’t seem to matter. Because inflation increases modestly, gold rallies and cryptocurrencies gain more respect during the year.
7. Even as energy company executives cut estimates for long-term growth, near-term opportunities are increasing. The return to “normal” increases both industrial activity and mobility, and the price of West Texas Intermediate oil rises to $65 per barrel. Rig counts increase and energy high-yield bonds rally soundly. Energy stocks are among the best performers in 2021.
8. The equity market broadens out. Stocks beyond healthcare and technology participate in the rise in prices. “Risk on” is not without risk and the market corrects almost 20 percent in the first half, but the S&P 500 trades at 4,500 later in the year. Cyclicals lead defensives, small caps beat large caps and the “K”-shaped equity market recovery unwinds. Big-cap tech is the source of liquidity, and the stocks are laggards for the year.
9. The surge in economic growth causes the 10-year Treasury yield to rise to 2 percent. The yield curve steepens, but a concomitant increase in inflation keeps real rates near zero. The Fed wants the strength in housing and autos to continue. As a result, it extends the duration of bond purchases in order to prevent higher rates at the long end of the curve from choking off credit to consumers and businesses.
10. The slide in the dollar turns around. The post-vaccine strength of the U.S. economy and financial markets attracts investors disenchanted with the rising debt and slower growth of Europe and Japan. Treasurys maintain a positive yield and the carry trade continues.

Other potential surprises for 2021 considered by Wien and Zidle that did not make the list — either because the Blackstone executives did not deem them as relevant, or they didn’t quite make the “probable” threshold — were these three also-rans.

• Cyber-attacks, mostly from Eastern Europe and the Middle East, begin to have an economic impact. Bank account information is invaded and distorted, patient records are lost at hospitals and credit collection companies can’t keep track of customer purchases. Those tampering prove to be more skillful than those protecting the integrity of the data and the dislocation cost becomes significant.
• Tesla acquires a major global auto manufacturer in a transaction that involves a combination of cash and stock. Elon Musk is the CEO and pledges to eliminate the internal combustion engine by the end of the decade.
• Kim Jong-un threatens to explode his latest long-range missile, capable, he says, of reaching Los Angeles. Trump invites him onto TV and explains that Kim will be a better person and the world will be a better place if he works with other countries rather than threatening them. Kim agrees to stop testing long-range missiles. Trump looks into the camera and says, “People say I am the best negotiator.”

Not exactly a Reagan-esque declaration that “it’s morning in America,” but Wien and Zidle, if accurate, have given us reason to believe the new decade’s disastrous start will yield to better economic times ahead.

Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.