A correction hasn’t shaken the historic market rally yet, but Wall Street legend Byron Wien says it’s “definitely” coming.
“A 10 percent correction could arrive at any time, and particularly when the market has done and also it’s done. After all basically it’s gone directly since Donald Trump was elected,” Wien warned on Wednesday on CNBC’s “Trading Nation.”
If a correction of that magnitude were to hit today, the Dow would suffer a 2,400 point blow.
Wien, vice chairman of Blackstone’s Private Wealth Alternatives group, gives a 50 percent probability for a deep sell-off by year-end. He’s been in the correction camp all year – and says he’s concerned it hasn’t happened yet.
“The market is overbought and investors are optimistic,” stated Wien. “An overbought market with optimistic investors is vulnerable, and the question is what triggers the vulnerability?”
It’s not an easy answer, according to Wien. His hunch is a geopolitical development, for instance a major conflict with North Korea, could result in a correction by leading to instability. But it is also possible the rally could just pause on its own.
“Maybe the market just spontaneously begins to fade,” added Wien, who believes the markets already are borrowing performance from 2018.
It doesn’t matter how it materializes, Wien doesn’t see it as a sign that a bear market is just about the corner. He believes shares would bounce again quickly, and ultimately end 2018 higher than current levels.
“Fundamentals are very strong,” Wien said.
The Dow, which is up 32 percent since Trump was elected, saw its second negative session in a row on Wednesday after falling about 40 points. It shut at 24,140.