Saxo Bank's Q1 2018 Quarterly Outlook
Get expert insights into global financial markets and discover potential trade ideas, with the #SaxoStrats’ Quarterly Outlook.
Our expert strategists have come together to offer you unrivalled analysis, getting to the heart of economic forecasts, policy horizons, asset prices and more. This publication focuses on financial bubbles and how to identify them, and looks at why this could be a crucial quarter for assets that became overextended after a low-volatility 2017.
Insights from the #SaxoStrats
Chief Economist & CIO / Saxo Bank
"There are a great many bubbles afoot right now"
Quantitative Analyst / Saxo Bank
"Nothing is certain until after the pop"
Head of Equity Strategy / Saxo Bank
"This is the most important year for equities since 2008"
Head of Fixed Income / Saxo Bank
"Take a look at the 10-year Treasury yield... Q1 is a time to be cautious"
Cryptocurrency Analyst / Saxo Bank
"Cryptocurrencies are behaving similarly to the dot-com stocks of the late 1990s"
How to spot a financial bubble
Former Federal Reserve chair Alan Greenspan once stated that it’s “very difficult to definitively identify a bubble until after the fact”, but he was wrong. It is certainly possible to identify a bubble, even if it’s not so easy to time its burst.
A bubble is a specific mathematical formation in which super-exponential growth causes a departure from fundamentals. It is this departure that triggers the eventual sharp correction.
Saxo Bank’s strategy team sees a great many bubbles in world markets right now. Some are fully formed and some are still forming, but all require investors to see them for what they are and maintain a good grasp on the fundamentals below.
It is time to talk about how financial bubbles form and not how they end. The continued contraction of the credit impulse as well as central bank policy normalisation, inflation expectations, fiscal deficit expansions, cross-asset correlations, and a lack of political reforms all point to a slowdown sometime in 2018.
The most successful investors will be those who see it coming.