Head of Editorial Content, Saxo Bank
Summary: Saxo Bank's Quarterly Outlook for Q2 2019 is now live.
Discover expert insights and emerging trading themes in the #SaxoStrats’ Q2 2019 Outlook
Europe was the big winner of the post-Berlin Wall move towards globalisation and multilateralism. As these themes recede, replaced by stubbornly low growth and renewed nationalism, it could become the big loser.
European valuations continue to lag their US counterparts, German recession looms large on the horizon and we expect the perennial “basket case” narrative to grow stronger in the coming months.
But what if this is the darkness before the dawn?
Real macro changes only occur following breakdowns and crises. Solutions, however, could be found in the newly combative EU institutions that will near-certainly follow the May Parliamentary elections. After a decade of zero or negative interest rates, the policy response must come sooner rather than later.
Europe has many strengths that investors too readily overlook. It is perfectly positioned to benefit from automation, AI, digitalisation and a capital market that is cheap by any standards, and it retains the best average educational system in the world.
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2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
