Please note: Outrageous Predictions should not be considered as Saxo Group’s official market outlook. It is instead the events and market moves deemed outliers with huge potential for upsetting consensus views. See the full list here.
Auf wiedersehen, Mutti! Tariffs on German cars and a lack of digitalisation leaves Germany limping into a recession before the end of 2019. As well, Merkel declines to run for chancellor again, setting up a power struggle in German politics at a time when the country needs stability and a major transformation of Europe’s most powerful economy.
A global leader for decades, Germany is struggling to upgrade its leveraging of modern technology. A 2017 study by the Organisation for Economic Co-operation and Development, for example, ranks Germany 29th out of 34 developed economies for high speed internet!
The crown jewel of the German economy, representing a cool 14% of GDP, is its car industry. The German automotive world, however, is far behind in terms of its conversion to electric vehicles and the use of big data. When Merkel was in China in May, she was so stunned at the country’s production facilities that she asked for Chinese help to speed up German adaption of this critical export commodity. Maybe that’s why German car giants like Volkswagen and Daimler currently trade at a recession-like price-to-earnings ratio of six?
The global car industry was supposed to be a growth juggernaut, registering 100 million cars sold in 2018. In the end, it only managed to unload 81 million cars, a mere 2% more than 2017 and well down from the 5-10% yearly growth rates that characterised the 2000s.
By 2040, 55% of all new global car sales and 33% of the stock will be EVs. But Germany is only just starting the transformation to EV and is y ears behind, and stiffer US tariffs won’t make things any better for German supply chains or exports.
2019 will be the peak of anti-globalisation sentiment and will create a laser-like focus on costs, domestic markets and production, and the further use of big data and reduced pollution footprint – the exact opposite of the trends that have benefitted Germany since the 1980s.
As such, we see a recession arriving as early as Q3’19.
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.
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