It’s that time of year again – SaxoBank Outrageous Predictions 2016 is now available to download!
The Danish bank and forex broker’s madcap yearly take on the predictions game has become something of a holiday season tradition, with its chief analysts laying out some unlikely but plausible scenarios for the financial markets in 2016.
Saxo Bank’s Chief Economist, Steen Jakobsen, explains what the bizarre publication is all about:
Saxo Bank’s Outrageous Predictions 2016 remain an exercise in finding ten relatively controversial and unrelated ideas which could turn your investment world upside down. It is rewarding to see how the Outrageous Predictions catch our clients’ imagination and fuel ongoing debate; it is this process of discussion and anti-herd thinking that is at the heart of Saxo’s now established tradition of attempting to draw attention to the unfathomable.
So, whether you want to treat this year’s Outrageous Predictions as an exercise in risk management or simply as a bit of festive fun, let’s take a look at what this year may hold in store . . .
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Saxo Bank Outrageous Predictions 2016
1. Steen Jakobsen – EURUSD direction? It’s 1.23…
Europe is running a massive current account surplus and its weaker inflation should, in macroeconomic logic, mean a stronger currency, not a weaker one. The race to the bottom has gone full circle, meaning we are back to a weaker US dollar again as the direct outcome of US interest rates policy.
2. John J Hardy – Russia’s rouble rises 20% by end-2016
In 2015, the combination of collapsing oil prices and financial sanctions against Russia over the situation in Ukraine saw a rough ride for Russian assets and its currency, the rouble. By the end of 2016, a surge in oil demand and the Fed raising rates at an inappropriately slow pace causes the Russian rouble to rise some 20% versus the US dollar/euro basket in 2016.
3. Peter Garnry – Silicon Valley’s unicorns brought back down to earth
2016 will resemble 2000 in Silicon Valley with more startups delaying monetization and tangible business models in exchange for adding users and trying to achieve critical mass. But the harsh reality eventually sinks in that public markets just won’t buy the VC-backed tech firms at highly inflated prices.
4. Mads Koefoed – Olympics to turbo-charge EM’s Brazil-led recovery
Stabilization, investment spending on the Olympics, and modest reforms will see sentiment rebound in Brazil, with EM exports helped by cheaper local currencies. The result: EM equities to have a great year – outperforming bonds and other equities.
5. John J Hardy – Democrats retain presidency, retake Congress in 2016 landslide
The Republican Party goes from strength to dramatic weakness as the rifts from an internal struggle on its future direction play out. This leads to a landslide victory for the Democratic Party as they successfully execute a get-out-the-vote campaign with Millennials coming out in droves having been frustrated by the political stalemate and weak job prospects of the last eight years.
6. Ole S Hansen – OPEC turmoil triggers brief return to $100/b oil
OPEC’s crude oil basket price drops to the lowest since 2009 and unease among weaker as well as wealthier members of the cartel over the supply-and-rule strategy continues to grow. The long awaited sign of an accelerated slowdown in non-OPEC production finally begins to flicker. Suitably buoyed, OPEC catches the market on the hop with a downward adjustment in output. The price mounts a quick recovery with investors scrambling to re-enter the market to the long side – once again bringing $100/barrel prices onto the horizon.
7. Ole S Hansen – Silver breaks golden shackles to rally 33%
2016 will see a renewed confidence in silver. The political drive towards reducing carbon dioxide emissions by supporting renewable energy will add to increased industrial demand for the metal, given its use in solar cells. As such, silver will rally by a third, leaving other metals behind.
8. Simon Fasdal – Aggressive Fed sees meltdown in global corporate bonds
Late 2016 will see Fed chief Janet Yellen embark down a hawkish path with a series of aggressive rate hikes, triggering a huge selloff in all major bond markets as yields start to rise. As the portions of bank and broker balance sheets allotted to bond trading and market making have almost disappeared, one of the vital parts of a functioning market is simply not there. This realization sinks in too late and the entire buy-side flee into a panic selling one-way street, as highly advanced risk models lurch into a symmetric red alert.
9. Peter Garnry – El Niño sparks inflation surge
Next year’s El Niño will be the strongest on record and will cause moisture deficits in many areas of southeast Asia and droughts in Australia. Lower yields across agricultural commodities will curb supply at a time when demand is still increasing on the back of global economic expansion. The outcome will be a 40% surge in the Bloomberg Agriculture Spot Index, adding some much-needed inflationary pressure.
10. Christopher Dembik – Inequality has last laugh on luxury
Faced with rising inequality and unemployment of over 10%, Europe is considering the introduction of a basic universal income to ensure that all citizens can afford to meet their basic needs. In a more egalitarian society where other values are promoted, demand for luxury goods decreases sharply – the sector collapses.
We submitted the results of our own lighthearted gaze into the crystal ball of global economics to the Saxo Bank Outrageous Predictions 2016 publication, but it wasn’t selected for inclusion (we didn’t see that coming, clearly!). Nevertheless, here it is in full:
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To gain full access to Saxo Bank’s economic analysis and commentary, including the more serious Quarterly Essential Trades, visit the TradingFloor.com website.