Summary Q2 2023 Outlook: The Fragmentation Game

Summary Q2 2023 Outlook: The Fragmentation Game

Steen Jakobsen
Chief Investment Officer

Summary:  This Quarter's Outlook, "The Fragmentation Game", is our view on how a new world order forces you to reconsider your investment strategy. Read it today.

An Executive Summary

The sudden March advent of turmoil in US banks, and then a mere week later, the SNB-engineered weekend takeover of Credit Suisse by UBS, sent shockwaves through global markets in March. We scrambled to work through the consequences, as we were in mid-stream with the preparation of this Q2 Outlook. In this publication, we have endeavored to address this crisis, which will have important short-, medium- and long-term consequences for both banking systems and our economies. The crisis has sharply brought forward the coming recession, for example. In the intro to this publication, our CIO, Steen Jakobsen, leads readers through the implication of the sudden bank turmoil that unfolded late in Q1, noting that this is no 2008-09 solvency crisis, but the result of the spike in the cost of funding.

But we also touch extensively on the originally intended theme for this Outlook, which is The Fragmentation Game. This is our term for what many call “deglobalisation”, a term we find too vague. As Steen Jakobsen points out, the word fragmentation better describes how the process of deglobalisation works, as the world’s economic blocs have lurched into a profound realignment that will play out over coming decades. The game has begun for every nation to ensure that all critical supply chains, whether for medicine, energy, vital resources, technology or defense, are either completely at home or with a friendly trading partner, or ideally, both. 

Our Hong Kong-based strategist, Redmond Wong, looks at the challenges China faces as it boldly carves out a more prominent role in multi-lateral global institutions, deepens strategic trade relationships and reduces its reliance on exports for the first time in the modern era. Securing technology, and especially resources, will be China’s chief challenges. Our macro strategist, Charu Chanana, focuses on Southeast Asia’s, and especially India’s, enormous potential in a fragmenting world. She weighs, for example, India’s strong demographic profile and huge upside potential in manufacturing against the nation’s traditional speed-limiters like protectionism and burdensome bureaucracy.   

Our equity and quant strategist, Peter Garnry, looks into the equity market impact from the banking crisis after the year had gotten off to a roaring start for many pockets of the equity market, with Europe a strong performer on avoiding an energy crisis. He also delves into where the Fragmentation Game will provide both pain and opportunities in equities. The obvious sectors in focus include semiconductors, defence, renewable energy, logistics, larger companies, and especially quality companies with low debt and strong competitive characteristics.

Our macro strategist, Christopher Dembik, looks at the risk of where the banking crisis could take the US economy next, namely into recession eventually, but focuses readers’ attention on the heavy concentration of commercial real estate loans in smaller and regional US banks as a potential next-shoe-to-drop. The real estate angle is critical to watch in Europe and the UK as well.

In FX, strategist John Hardy notes that the interest rate cycle has now turned sharply and ponders the forward policy mix and jockeying among currencies as stimulus to soften the impact of further financial system turmoil, and eventually the incoming recession will have to take a very different form relative to the crises we have known over the last 25 years. Japan knows the playbook, as it will almost inevitably involve some form of yield curve control.

In commodities, Ole Hansen discusses how the China re-opening surge in commodities fizzled in Q1, but notes it is too quick to write off the potential for commodities: parts of the Fragmentation Game, like the electrification of much of our energy, are very metal-intensive, especially copper-intensive. And the traditional inflation hedge of precious metals has already revived in Q1, with gold posting a record high against several major currencies.

Finally, Investment Coach Hans Oudshoorn relays how investors can hedge downside in their equity positions using a popular approach: an options collar that involves buying a put that is at least in part financed by selling a call option, providing an example on an underlying S&P 500 future position. 

We wish you a safe and prosperous Q2 and beyond. The stakes for investors for the remainder of this year and beyond have risen with the latest market turmoil, and the Fragmentation Game will require all of us to consider how the world is ordered and what its reconfiguration will mean for our investments for the coming quarters, years and decades.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.