Every year, Saxo Bank CIO and chief economist Steen Jakobsen comes up with a selection of “outrageous” predictions for the new year.
Note: This is not the official Saxo forecast, but I do believe many of the ideas below are in-line with their general direction on things.
The predictions are not all that outrageous. I expect many will happen.
Here’s the email from Steen.
Close of the Paradigm by Steen Jakobsen
The irony in this year’s batch of outrageous predictions is that some of them are “outrageous” merely because they run counter to overwhelming market consensus. In fact, many would not look particularly outrageous at all in more “normal” times – if there even is such a thing!
In other words, it has become outrageous to suggest that emerging markets will outperform, that the Russian rouble will be the best-performing currency of 2016, and that the credit market will collapse under the weight of yet more issuance. We have been stuck in a zero-bound, forward-guidance lowering state for so long that there exists a whole generation of traders who have never seen a rate hike from the Federal Reserve. As we close out 2015, it has been nearly 12 years (early 2004) since the US economy was seen as recovering strongly enough to warrant starting a series of hikes – and that series ended in early 2006, nearly ten years ago.
Mind you, I have been trading for over 25 years and I have only seen three Fed rate hike cycles in my entire career: 1994, 1998 and 2004.
We are truly entering a new paradigm for many market participants and the new reality is that the marginal cost of money will rise, and thus so will volatility and uncertainty.
All of this is embedded in this year’s Outrageous Predictions. As always, it’s rewarding to see how our customers pitch in and how this publication creates a stimulating debate. Our hope is that these predictions might both inspire you and unsettle your more complacent assumptions.
More than anything, we encourage you to join the debate – whether you agree or want to push back and argue the other side. It is this process of discussion and thinking outside the box that is at the heart of Saxo’s now quite long history of outrageous predictions.
Let me again and for good order’s sake remind you that this is not Saxo Bank’s official forecast. It is, however, a set of ten independent events which we at the time of writing think could have a material impact on your portfolio should they come to fruition.
2015 was a poor year for us in terms of predicting the outrageous, but as I travelled around the world over the past 12 months it became obvious to me that we are at some sort of an “end of the road” in terms of world markets.
We are at the close of the paradigm that has reigned since the response to the global financial crisis. Quantitative easing and the policy response have failed us, China is transitioning, and geopolitical tensions are as complicated and hot as ever, to name just three key factors.
I hope that this year’s suite of predictions will prepare you for whatever comes our way in 2016, and while we can hardly hope to be right on more than one or two predictions each year, we’d like to think that these “outrageous” calls have at the very least a greater probability of coming true than the near-constantly wrong consensus.
I wish you a happy holiday and a good trading year in 2016!
Steen Jakobsen / CIO
Here’s the Saxo PowerPoint Presentation that you can download if desired.
1. Euro Rallies to 1.23
2. Rise of the Ruble
For a text explanation behind each view please see Saxo Bank Outrageous Predictions for 2016.
Mike “Mish” Shedlock