Podcast: Positioning yourself for this crisis and its aftermath
Head of FX Strategy
Summary: The Saxo Strategy Team recorded a long-form podcast aimed at highlighting what is at stake for markets and the economy both as this crisis runs its course, and in its aftermath. The team highlights that this crisis will bring an enormous paradigm shift that requires investors to position for a whole new market and economic environment. Here, we pull out some of the themes from this podcast.
Yesterday we recorded a special edition of the Saxo Market Call podcast, in which we tried to get in the helicopter and take a look at the lay of the land not just here in the teeth of this crisis, but where things are likely to head as we get to the other side of it as well. We mulled everything from the danger of an inflationary and even stagflationary outcome for the economy to the outlook for equities, bonds, commodities and foreign exchange. It’s a must listen for those considering the longer term perspective here and how to position for the post Covid19 market environment.
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Below are a few takeaways from the our forty-five minute conversation.
On Macro – Steen Jakobsen
- Long volatility exposure is a must in portfolios as a counterweight to the inevitable arrival of fat tail events – disaster insurance of 1-2% of portfolio at all times.
- Commodities are too weak relative to other assets – particularly metals and softs.
- In equity, being long tangible assets that are a part of bringing higher productivity and improving the climate. Internet monopolies don’t do that…
On Equities – Peter Garnry
- The climate issue won’t go away, we like equities linked to green technologies such as water purification, solar, wind, fuel cells, and bioplastic.
- Robotics and automation stocks due to aging demographic shift and inflation
- Health care stocks but selectively as these are currently trading at historically high valuations
On Commodities – Ole Hansen
- Gold and especially silver because of the latter’s duel use as a precious metal but also in industry. The silver price is some 50% discounted relative to its normal price versus gold. Instruments: Spot Gold and Silver: XAUUSD and XAGUSD,
- In the long run, oil and natural gas prices are too cheap and these low prices are destroying future supplies through bankruptcy of operators and underinvestment, such that when demand returns, prices for both will rise sharply.
- Agricultural products on climate change and disruptions from changed mentality as countries may look to maintain excess reserves
On Currencies – John Hardy
- The USD must peak and decline as a sign that this crisis is fading – somewhere not terribly far ahead we will see a spectacular bear market for USD that will accompany – or serve as a coincident indicator of –the global reflation of prices for “real stuff” – commodities and real goods that we discuss above.
- Commodity currencies and EM currencies will be the best performers from the bottom – tricky to navigate in the short term, but worth accumulating on panics until larger positioning on the other side of the major market bottom.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.