Markets 2019 – what lies ahead?
Head of FX Strategy, Saxo Bank Group
Summary: After a torrid year, capped by a treacherous finale, our Head of FX Strategy runs us through the hurdles and opportunities that await in 2019.
Are we headed into a global recession?
And just as importantly, what will the policy response look like the next time around? We suggest the next cycle of policy response will see central banks losing their independence as their reactions to the last crisis only dug a deeper hole and the answers to the world’s excess debt problems will have to be answer by government policy with central banks as auxiliaries to that policy.
When will the US dollar turn weaker?
The tight Fed and the liquidity absorption one-two of Trump’s fiscal blitz from tax reform and the Fed’s QT have dried up offshore USD liquidity – the key drivers of the US dollar’s 2018 resurgence – will the USD only weaken again when the Fed is forced to not only stop tightening but to reverse course?
Can China deal with its need to deleverage while maintaining relative yuan stability?
Certainly, less risk now for the Chinese economy if China chooses the weaker yuan path, given the massive sell-off in crude oil.
EU politics – spinning apart or pulling together?
The EU political situation and increasingly the financial situation in EU banks is in a bad place as we head into a pivotal 2019 for the EU. Possibly pivotal EU parliamentary elections are the first political litmus test in May. France and Italy’s budget situation will emerge again sooner or later next year and the EU political elite needs to wake up and get ahead of the curve by ending austerity and providing a roadmap towards greater mutualisation of debt, otherwise the countdown toward the next country to exit the EU – the euro currency area at least – begins.
A second referendum appearing more likely and supposedly favouring a Remain vote – but wouldn’t a narrow overturn of the original Brexit referendum then trigger civil strife across the UK? At worst, even if we are heading toward a “no deal” Brexit, a significant delay is likely first and sterling looks too cheap even if more two-way volatility awaits early next year.
I will discuss the above questions and more in our quarterly outlook available around mid-month in January. Until then, a very happy New Year and please stay safe out there!
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on EquitiesThe Nasdaq bubble pattern, USDJPY resistance, crude oil uptrend losing steam and the technical outlook for USD.
China: the train of new development paradigm left the station two years agoChina is transiting to a new development paradigm, as they are hit by deteriorating terms of trade, a slower global economy and an uncertain future while continuing attempts to contain the pandemic.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)