Blackstone Vice Chairman Byron Wien predicts that financial markets will come to a halt in mid-2023, followed by a drastic rebound as the Federal Reserve’s fight against inflation will only lead to a mild recession. Wall Street veterans released their anticipated annual list of surprises on Wednesday. Wien started the tradition in 1986 when he was a US investment strategist at Morgan Stanley, and his list of surprises is must-read on Wall Street. He currently co-authors the list with Joe Zidle, chief investment strategist for Blackstone’s personal wealth solutions group. Wien defines “surprise” as an event that the average investor will only determine 1-in-3 chance of happening, but believes it is “probable” with more than 50% probability of taking place. “Although the Fed is tightening, the market reached the bottom in the middle of the year and began a recovery comparable to 2009,” Wien said. The S&P 500 just suffered its worst year since 2008 with a loss of nearly 20% and snapping a three-year winning streak. The Fed has raised its benchmark interest rate to its highest level in 15 years and signaled more hikes could be coming to control inflation. Wien thinks that, when the Fed succeeds in reducing inflation, it “remains” time in a restrictive area. Margins squeezed in a mild recession, he said. Prominent investors say the Fed’s tightening could push the fed funds rate above the private consumption expenditure price index and lead to positive real interest rates – a rare phenomenon in recent decades. Another Fed-related surprise from Wien was that the US central bank remained more hawkish than its global counterparts, causing the dollar to strengthen against major currency pairs, including the yen and the euro. “This creates a generational opportunity for dollar-based investors to invest in Japanese and European assets,” Wien said. On another topic, Wien called for a ceasefire in the Ukraine war in the second half of 2023 when negotiations on the division of the region begin. Meanwhile, Wien expects China to move closer to its 5.5% growth target and work aggressively to rebuild strong trade ties with the West. Market veterans also expect that Elon Musk will have Twitter “on the road to recovery” by the end of the year.