Saxo's 2019 Outrageous Predictions
Chief Economist & CIO
Summary: Welcome to the 2019 edition of Saxo's Outrageous Predictions, our annual tongue-in-cheek collection of events and occurrences that are unlikely to materialise but which could have huge consequences for the investment outlook if they did. Remember, these do not in any way represent the official Saxo Bank outlook or forecast but do read them anyway – and enjoy.
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.
A world containing Donald Trump as the US president makes outrageousness a cheap commodity in the daily news cycle, but we won’t let that keep us from this year’s Outrageous Predictions: our yearly task of conjuring unlikely – but not impossible – events that may just come to life in the new year.
This year’s edition has a unifying theme of “enough is enough”. A world running on empty will have to wake up and start creating reforms, not because it wants to but because it has to. The signs are everywhere. Valuations are overstretched, political shifts are sudden, and even seemingly minor cultural developments like the rise of the celebrity chef appear to point to a society stretched to its peak.
Does that last one look like a step too far? Well, the great documentary The Four Horsemen cited it as a sign of overreach, noting that “during the final decades of their own empires, the Romans, the Ottomans and the Spanish all made celebrities of their chefs.” Are we, too, nearing the end of our own imperial moment?
Having done this job for more than 30 years, I am struck by how unaccountable our society has become at the political, corporate, and even the individual level. Greed is the new black and it’s met by complacency rather than a cry for fairness and productivity. The focus is instead on marginal improvement and avoiding mishaps rather than making bold decisions to change the world towards better, faster, fairer and more equal.
“If we can just avoid the pain today” is the new mantra, or more despairing still: “things may not be great, but they could be worse!”
We think 2019 will mark a profound pivot away from this mentality as we are reaching the end of the road in piling on new debt and next year will see us all beginning to pay the piper for our errant ways. The great credit cycle is already showing signs of strain in late
2018 and will rip through developed markets next year as central banks are sent back to the drawing board. After all, their money printing efforts since 2008 have only dug a deeper debt hole, and it has now grown beyond their mandate to manage.
We have no idea whether any of our fresh crop of predictions will come true. The point is to provoke debate and to expand our awareness of what might go wrong in 2019. Through this process, we can prepare for potentially earth-shaking challenges to our
portfolios and even our livelihoods.
Looking down the list of Outrageous Predictions, it strikes me that if some of these see the light of day, we might finally see a healthy shift towards a less leveraged society, with less focus on short-term gains and growth, and a new focus on productivity and a new economic revolution back toward globalisation with a fairer playing field after the immediate moment of crisis. On the negative side, our calls include a considerable weakening of central bank independence, a credit crunch, and big losses in the asset where everyone is too long: real estate.
Before you dive in, please remember the ground rules for Saxo’s Outrageous Predictions: these do not in any way represent the official Saxo Bank outlook or forecast. Instead, they are unlikely risks which are still underappreciated and could radically change the investment outlook and economics over the next 12 to 24 months if they do indeed see the light of day.
2018 was an unusual year. Much of the year saw US markets going it alone, but once the juice from buyback programmes ran out, the economic gravity of a weakening credit impulse and higher prices of money and anti-globalisation were felt, and we face a rocky
end to 2018. Looking into 2019, the best we can imagine for financial markets is rough sailing, and our worst fear is the Perfect Storm.
We want to use this opportunity to thank you for all the great engagements and events we have shared in 2018. It was a very interesting year and I have the feeling that the next five years will be the most defining in my long career.
I look forward to the changes we predict if only because the outcomes could yet prove extremely positive. Only through a productive society can we deal with debt, immigration, populism and inequality. Studies show that the best and most efficient way to become
more productive is simple: education and basic research.
That’s the positive news, the bad news is that not everyone will appreciate the roller coaster ride ahead. To paraphrase the great Mick Jagger, we can’t always get what we want – but we might just get what we need.
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