Saxo News & Research - Videos

Saxo Market Compass - 27 April 2026

Mon, 27 Apr 2026 19:00:00 Z

Saxo Weekly Market Compass – 27 April 2026

Recap of last week (20 to 24 April 2026)

Oil shocks meet resilient risk appetite.

Markets balanced rising geopolitical tension and higher oil prices against steady earnings and AI-driven momentum. US equities extended gains, while Europe lagged under energy pressure. Volatility stayed contained but elevated, signalling caution rather than stress, while bonds and commodities reflected a renewed inflation impulse.

Market pulse: Resilience persists, but the macro backdrop is becoming less forgiving.

Equities

Narrow leadership continues; regional performance diverges along energy exposure lines.

US equities: Narrow leadership continues to carry the market. The S&P 500 and Nasdaq 100 pushed higher through the week (April 23–24), supported by strong earnings and semiconductor momentum. Intel’s +23.6% surge (April 24) and gains in AMD and Arm reinforced AI-led strength, while weaker prints such as ServiceNow (–17.8%) exposed fragility beneath the surface. Oil-driven inflation concerns capped broader participation, keeping the rally concentrated. Market pulse: Strong at the top, but increasingly dependent on a narrow group.
Europe and Asia: Energy divergence defines regional performance. European equities declined, with the STOXX 600 down through the week as rising oil prices pressured margins, particularly in transport and industrials. Energy majors provided partial support, while selective earnings (Nestlé, ASM International) offered pockets of strength. In Asia, Japan and Korea outperformed on chip demand, while oil-importing economies showed strain. Market pulse: Global equities are diverging along energy exposure lines.

Looking ahead – equities

Focus shifts to earnings concentration risk. Results from Microsoft, Amazon, Meta Platforms, Alphabet, and Apple will test whether AI-led leadership can broaden. Any disappointment could expose the market’s narrow base, especially with oil still elevated.

Volatility

Elevated but orderly: hedging persists without panic.

VIX and implied moves: The VIX held between 18 and 19 throughout the week, with spikes tied to Strait of Hormuz developments fading quickly. Options pricing reflected controlled risk, with implied weekly moves tightening from around 1.4% early in the week to below 1% mid-week before re-expanding. Skew remained defensive at times, with downside protection demand reappearing despite strong equity performance.

Market pulse: Markets are hedged, not stressed.

Looking ahead – volatility

With the Federal Reserve decision and heavy earnings calendar, implied moves have widened again toward roughly 1.6% to 1.7%. Volatility is likely to be event-driven rather than trend-driven, with skew direction offering the clearest signal of sentiment shifts.

Options sentiment

Hedged participation dominates: engagement without conviction.

Options flow showed consistent demand for downside protection across indices and cyclical sectors, particularly early in the week. Investors remained active but cautious, maintaining hedges rather than expressing outright bearish views.

Selective upside participation appeared in large-cap technology, energy, and financials, but rarely in isolation. Call buying was typically paired with protective structures, including collars and two-sided volatility trades, especially around earnings and macro catalysts. By week’s end, positioning evolved into more balanced setups, with increased use of paired strategies.

Market pulse: Investors are participating, but always with protection attached.

Looking ahead – options sentiment

Expect continued preference for structured exposure into major earnings and the Fed. If realised volatility exceeds implied levels, positioning may shift toward more directional trades; otherwise, two-sided strategies are likely to dominate. Watch skew and short-dated flows for early signals of conviction returning.

Digital assets

Stable but selective: institutional flows drive the narrative.

Bitcoin and Ethereum: Bitcoin held in the 75,000 to 78,000 range, while Ethereum remained softer near 2,300. Institutional flows remained the key driver, with IBIT seeing steady inflows, while ETHA showed mixed demand. Crypto equities reflected selective risk appetite, and altcoins remained secondary to broader sentiment.

Market pulse: Stability holds, but conviction is uneven and flow-dependent.

Looking ahead – digital assets

Crypto will continue to track macro risk sentiment, particularly equity volatility and rates. Sustained inflows into IBIT versus mixed ETHA flows suggest leadership remains concentrated in Bitcoin unless broader risk appetite strengthens.

Fixed income

Yields rise as inflation concerns return via energy.

US Treasuries and European yields: US Treasury yields moved higher, with the 10-year near 4.30 to 4.35% during the week, driven by oil-linked inflation expectations. The 2-year fluctuated between roughly 3.72% and 3.84%, reflecting uncertainty around policy direction. European yields followed, pressured by similar inflation dynamics.

Market pulse: Bonds are repricing inflation risk, not growth optimism.

Looking ahead – fixed income

The Federal Reserve decision and forward guidance will be key. Any shift in tone toward persistent inflation could push yields higher, while a more cautious stance may stabilise the front end. Oil remains the critical input variable.

Commodities

Energy leads: supply disruption drives the complex.

Oil and energy: Oil moved above 100 mid-week as supply disruptions intensified, lifting broader commodity indices. Fuel products led gains, while natural gas diverged lower on oversupply. Agricultural markets began pricing fertiliser shortages and weather risks, while metals remained mixed.

Market pulse: Commodities are being driven by supply shocks, not demand strength.

Looking ahead – commodities

Oil remains the dominant driver. Any progress in negotiations could ease prices quickly, while continued disruption may extend inflationary pressure across the complex. Watch agricultural markets for second-round effects from fertiliser constraints and weather patterns.

Currencies

Dollar mixed as traditional correlations weaken.

US dollar and majors: The US dollar showed mixed performance, firming early in the week before softening. EURUSD traded around 1.17, while USDJPY hovered near 159 to 160, raising intervention risks. Commodity-linked currencies strengthened alongside oil, reflecting selective macro alignment.

Market pulse: FX markets are driven more by rates than risk sentiment.

Looking ahead – currencies

Central bank divergence will be the key driver, with Fed guidance and global policy signals shaping flows. USD direction will depend more on rate expectations than oil unless volatility spikes.

Key takeaways

The S&P 500 and Nasdaq 100 extended gains through the week of April 20–24, led by Intel at +23.6% and broader AI semiconductor momentum; European equities declined with the STOXX 600 under oil-related margin pressure.
The VIX held between 18 and 19 throughout the week, with intraday spikes tied to geopolitical developments fading quickly – elevated but orderly.
Options flow showed a consistent preference for hedged participation: downside protection across indices and cyclicals, with selective upside in technology, energy, and financials paired with collars and two-sided structures.
Bitcoin held in the 75,000–78,000 range, supported by steady IBIT inflows; Ethereum remained softer near 2,300 with mixed ETF demand.
US 10-year Treasury yields moved to 4.30–4.35% and the 2-year fluctuated between 3.72% and 3.84%, driven by oil-linked inflation expectations rather than growth signals.
Oil moved above 100 mid-week on Strait of Hormuz supply disruptions, lifting broader commodity indices; natural gas diverged lower on oversupply.
EURUSD traded around 1.17; USDJPY hovered near 159–160, raising intervention concerns as FX markets tracked rate differentials more than risk sentiment.
Cross-asset positioning reflected caution beneath resilient surfaces: equities higher but narrow; volatility contained but skewed defensively; bonds repricing inflation, not growth.

Looking ahead – week of 27 April to 1 May 2026

The coming week is structurally complex. The Federal Reserve’s rate decision arrives against a backdrop of oil-driven inflation risk that markets have already begun pricing, leaving guidance tone as the dominant variable. At the same time, concentrated earnings from the five largest US technology companies will determine whether the current AI-led equity rally can broaden or sustain its current pace.

The macro calendar is dense. Consumer confidence data and the start of big tech earnings set the tone early in the week, followed by the FOMC decision mid-week alongside earnings from Microsoft and Amazon. Apple reports toward the end of the week, with the US employment report rounding out a period that could reset risk appetite across asset classes.

The Fed decision is the single most binary risk event. Any shift in forward guidance toward sustained higher rates – in response to oil-driven inflation – could meaningfully reprice the front end of the yield curve and disrupt the equity rally’s narrow foundation. A more neutral or data-dependent tone may provide relief for bonds and extend the equity bid, though oil remains an independent variable capable of overriding either scenario.

Calendar highlights (times in GMT)

Mon 27 Apr – China PMI; Asian market open sentiment
Tue 28 Apr – US consumer confidence; Alphabet Q1 earnings after close; Meta Platforms Q1 earnings after close
Wed 29 Apr – FOMC rate decision (20:00 GMT); Fed Chair press conference; Microsoft Q1 earnings after close; Amazon Q1 earnings after close
Thu 30 Apr – Apple Q1 earnings after close; US initial jobless claims
Fri 1 May – US non-farm payrolls (April); US unemployment rate

Concluding remarks

Markets remain resilient, but the balance is becoming more delicate. Strong earnings and AI-driven momentum continue to support equities, yet rising energy costs are feeding into inflation expectations across asset classes. Volatility remains contained, but positioning shows clear caution beneath the surface.

The coming week will be decisive. Central bank guidance and concentrated earnings will determine whether markets can sustain their current trajectory or begin to reflect a more challenging macro environment.

This content is marketing material and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The Author is permitted to wait at least 24 hours from the time of the publication before they trade the instruments themselves.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options.
This content will not be changed or subject to review after publication.

The video featured on this page was generated using artificial intelligence. It is provided for informational and educational purposes only and reflects an automated interpretation of the accompanying article content.

Related articles/content
Saxo Market Compass - 20 April 2026 Saxo Market Compass - 13 April 2026 Saxo Market Compass - 7 April 2026 Saxo Market Compass - 23 March 2026 Saxo Market Compass - 16 March 2026 Saxo Market Compass - 9 March 2026 Global Markets are still only pricing for modest disruptions from Iran war (podcast) \| 9 March 2026 When markets look chaotic emotions matter more than portfolios \| 9 March 2026 Iran headlines market turbulence and options - a practical map of what to trade \| 4 March 2026 Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign \| 4 March 2026 Iran escalation The portfolio playbook \| 3 March 2026 Investor Q&A on the Iran-US conflict \| 2 March 2026 The Macro Take Iran conflict what to watch \| 2 March 2026 Saxo Market Compass - 2 March 2026 Iran escalation: Quick thoughts on markets \| 1 March 2026 Saxo Market Compass - 23 February 2026 Saxo Market Compass - 16 February 2026

Related articles/content

Saxo Market Compass - 20 April 2026
Saxo Market Compass - 13 April 2026
Saxo Market Compass - 7 April 2026
Saxo Market Compass - 23 March 2026
Saxo Market Compass - 16 March 2026
Saxo Market Compass - 9 March 2026

Global Markets are still only pricing for modest disruptions from Iran war (podcast) | 9 March 2026
When markets look chaotic emotions matter more than portfolios | 9 March 2026
Iran headlines market turbulence and options - a practical map of what to trade | 4 March 2026
Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign | 4 March 2026
Iran escalation The portfolio playbook | 3 March 2026
Investor Q&A on the Iran-US conflict | 2 March 2026
The Macro Take Iran conflict what to watch | 2 March 2026

Saxo Market Compass - 2 March 2026
Iran escalation: Quick thoughts on markets | 1 March 2026
Saxo Market Compass - 23 February 2026
Saxo Market Compass - 16 February 2026

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 20 April 2026

Mon, 20 Apr 2026 17:17:00 Z

Saxo Weekly Market Compass – 20 April 2026

Gains without full conviction – markets climbed on easing oil fears and earnings momentum, but the hedging never stopped.

Markets navigated a week dominated by shifting US–Iran dynamics, with oil volatility driving cross-asset moves while equities pushed to record highs. Investors increasingly looked through geopolitical noise, supported by resilient earnings and easing inflation signals, though sentiment remained fragile beneath the surface. By week's end, optimism around diplomacy briefly boosted risk appetite before renewed tensions reintroduced uncertainty. It was a week of gains, but not of full conviction.

Equities

Record highs driven by tech strength and easing oil fears.

United States: Wall Street extended its rally, with the S&P 500 moving from 6,886 early in the week to above 7,100 by Friday. Gains were led by AI-linked names and financials, as markets repeatedly treated geopolitical shocks as temporary. Oil pullbacks acted as a key trigger for renewed risk-taking, while earnings provided confirmation.
Europe & Asia: Europe remained more sensitive to oil and inflation, with selective strength in banks and travel as crude eased, while luxury and industrials lagged on earnings. Asia stayed supported by the AI cycle, led by semiconductor demand, though profit-taking emerged late in the week.

Market pulse: Equities are trending higher, but leadership is narrow and macro-dependent.

Looking ahead – equities

Earnings now take centre stage. Tesla and Intel will test whether AI-driven optimism can justify current valuations, while airline results will offer insight into demand versus cost pressures. If earnings confirm resilience, equities can hold levels; if not, the market loses its main pillar.

Volatility

Volatility compresses despite persistent geopolitical risk.

VIX: The VIX declined through the week into the high-teens, signalling calmer conditions even as Hormuz tensions persisted. Implied moves narrowed, but consistent downside skew showed investors continued to pay for protection. The surface calm masks a market still hedging tail risks.

Market pulse: Volatility is low, but not trusted.

Looking ahead – volatility

Focus shifts to earnings-driven volatility. Index volatility may stay contained, but single-stock volatility is likely to rise. Any renewed escalation in oil or geopolitics would quickly reprice index volatility from these compressed levels.

Options sentiment

Positioning shows participation with protection, not conviction.

Options flow reflected a market staying invested while actively managing risk. Upside exposure was present but largely expressed through defined-risk structures such as call spreads, while downside hedging remained persistent. Large-cap equities and financials showed the most caution, reflecting earnings uncertainty.

Sector dispersion stood out: metals saw constructive upside interest, energy flows were selective, and broader equity positioning avoided outright directional bets.

Market pulse: Investors kept risk on, but consistently paid to hedge it.

Looking ahead – options sentiment

This positioning creates asymmetry. If earnings surprise positively, positioning may need to chase upside. If not, existing hedge demand suggests limited downside panic but continued grind rather than breakout.

Digital assets

Crypto stable but conviction remains uneven.

Bitcoin & Ethereum: Bitcoin held broadly stable in the mid-$70k range, while Ethereum lagged slightly, highlighting uneven demand. Institutional flows remained supportive, with IBIT leading and ETHA seeing smaller but steady inflows. Crypto-linked equities outperformed at times, reflecting leveraged exposure to sentiment.

Market pulse: Crypto is stable, but still macro-driven rather than independent.

Looking ahead – digital assets

Crypto direction remains tied to broader risk sentiment. If equities extend gains and volatility stays low, flows should remain supportive. A macro shock – especially via oil or rates – would likely pull crypto back in line with risk assets.

Fixed income

Yields ease, then stabilise as macro signals balance out.

US yields: US yields declined through mid-week on softer inflation and lower oil, before stabilising as markets reassessed growth resilience. Central banks maintained a cautious stance, signalling no urgency to tighten despite energy-related inflation risks.

Market pulse: Bond markets reflect balance, not stress.

Looking ahead – fixed income

Retail sales data becomes key for validating consumer strength. Strong data could push yields higher again, while weaker numbers would reinforce the current steady-rate narrative.

Commodities

Oil volatility dominates, metals follow macro cues.

Oil: Oil moved sharply through the week, falling from elevated levels before rebounding as geopolitical headlines shifted. This volatility shaped broader market sentiment and inflation expectations.
Metals: Gold traded in a wide range, while copper gained on supply constraints and improving growth expectations.

Market pulse: Oil remains the macro anchor for all assets.

Looking ahead – commodities

Geopolitics remains the primary driver. Any clarity on Hormuz or US–Iran talks will directly impact inflation expectations and risk sentiment. Commodities are likely to stay reactive rather than trend-driven.

Currencies

Dollar weakens, then stabilises as risk sentiment shifts.

US dollar: The US dollar declined through most of the week before stabilising as oil rebounded and uncertainty returned.
Japanese yen: The yen remained weak despite lower yields, reflecting carry dynamics and policy uncertainty.

Market pulse: FX remains driven by rate expectations and risk sentiment.

Looking ahead – currencies

Currency direction hinges on rate expectations. Strong US data could support the dollar, while continued risk-on sentiment would favour cyclical currencies.

Key takeaways

The S&P 500 advanced from 6,886 to above 7,100 over the week, led by AI-linked names and financials as markets treated geopolitical shocks as temporary.
European indices showed selective gains, with banks and travel outperforming as crude eased, while luxury and industrials lagged; Asia was supported by semiconductor demand but saw profit-taking late in the week.
The VIX declined into the high-teens, compressing despite persistent Hormuz tensions, though elevated downside skew signalled ongoing demand for tail protection.
Options flow favoured defined-risk structures – call spreads over outright calls – with persistent downside hedging across large-cap equities and financials reflecting earnings uncertainty.
Bitcoin held broadly stable in the mid-$70k range while Ethereum lagged; institutional flows via IBIT remained supportive, with crypto direction remaining macro-dependent.
US Treasury yields declined mid-week on softer inflation and lower oil before stabilising as markets reassessed growth resilience; central banks signalled no urgency to tighten.
Oil moved sharply lower then rebounded as geopolitical headlines shifted, remaining the primary cross-asset anchor shaping sentiment and inflation expectations through the week.
Gold traded in a wide range; copper gained on supply constraints and improving growth expectations; the US dollar declined through most of the week before stabilising on oil's rebound.

Looking ahead – week of 20 April to 24 April 2026

Earnings season moves into its most consequential stretch, making the coming week structurally more binary than the one just passed. With geopolitical risk still unresolved and volatility compressed, a single earnings miss from a high-profile AI name could reprice both single-stock and index volatility simultaneously.

The key focus areas are equity earnings and macro data validation. Tesla and Intel are the headline tests for whether AI-driven equity valuations can hold at current levels. Airline results will offer a read on consumer demand versus cost pressures. US retail sales data is the pivotal macro release, capable of either reinforcing the soft-landing narrative or raising fresh concerns about consumer resilience.

The single biggest risk event is the combination of tech earnings and retail sales landing in the same week. A positive earnings surprise without macro confirmation could create a narrow, fragile rally. A miss in either would likely trigger the repricing that compressed volatility has so far avoided.

Calendar highlights (times in GMT)

Mon 20 Apr – Markets reopen; geopolitical monitoring continues (Hormuz / US–Iran)
Tue 21 Apr – Tesla earnings (after US close); early airline sector results
Wed 22 Apr – Ongoing large-cap earnings; US macro data releases
Thu 23 Apr – Intel earnings; US retail sales data
Fri 24 Apr – End-of-week positioning; options expiry considerations

Concluding remarks

Markets delivered another week of gains, supported by easing oil fears and strong earnings momentum, but conviction remains conditional. Volatility is low, positioning is hedged, and leadership is narrow. With earnings accelerating and macro data in focus, the coming week will determine whether this rally broadens or stalls under its own expectations. Staying selective and flexible remains key.

For a global look at markets – go to Inspiration.

Related articles/content
Saxo Market Compass - 13 April 2026 Saxo Market Compass - 7 April 2026 Saxo Market Compass - 23 March 2026 Saxo Market Compass - 16 March 2026 Saxo Market Compass - 9 March 2026 Global Markets are still only pricing for modest disruptions from Iran war (podcast) \| 9 March 2026 When markets look chaotic emotions matter more than portfolios \| 9 March 2026 Iran headlines market turbulence and options - a practical map of what to trade \| 4 March 2026 Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign \| 4 March 2026 Iran escalation The portfolio playbook \| 3 March 2026 Investor Q&A on the Iran-US conflict \| 2 March 2026 The Macro Take Iran conflict what to watch \| 2 March 2026 Saxo Market Compass - 2 March 2026 Iran escalation: Quick thoughts on markets \| 1 March 2026 Saxo Market Compass - 23 February 2026 Saxo Market Compass - 16 February 2026

Related articles/content

Saxo Market Compass - 13 April 2026

Saxo Market Compass - 7 April 2026
Saxo Market Compass - 23 March 2026
Saxo Market Compass - 16 March 2026
Saxo Market Compass - 9 March 2026
Global Markets are still only pricing for modest disruptions from Iran war (podcast) | 9 March 2026
When markets look chaotic emotions matter more than portfolios | 9 March 2026
Iran headlines market turbulence and options - a practical map of what to trade | 4 March 2026
Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign | 4 March 2026
Iran escalation The portfolio playbook | 3 March 2026
Investor Q&A on the Iran-US conflict | 2 March 2026
The Macro Take Iran conflict what to watch | 2 March 2026
Saxo Market Compass - 2 March 2026
Iran escalation: Quick thoughts on markets | 1 March 2026
Saxo Market Compass - 23 February 2026
Saxo Market Compass - 16 February 2026

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Oil, batteries and a cheaper Tesla: the next phase of the EV race

Fri, 17 Apr 2026 09:00:00 Z

Key takeaways

Tesla’s reported cheaper-car pivot looks like a return to EV basics, not a side story.
Higher oil prices help the EV case, but they do not fix weak margins.
Contemporary Amperex Technology Co. (CATL) shows that battery leaders may capture more value than many carmakers.

Tesla spends a lot of time being discussed as a robotaxi, software and artificial intelligence story. That is fair, up to a point. But the latest development says something simpler and, for investors, probably more useful. Tesla is reportedly working on a smaller, cheaper electric vehicle, after years of pushing the market to focus on autonomy and futuristic optionality. That matters because it suggests the old EV battle is back in charge: price, scale, battery cost and who can still make money when the shiny story meets a tired consumer.

That is the real hook here. Tesla is not just updating a product plan. It is admitting, indirectly, that the market has changed. In the first quarter of 2026, Tesla produced more than 408,000 vehicles but delivered just over 358,000, leaving a gap of more than 50,000 units. That is not a disaster, but it is a reminder that demand is no longer a one-way escalator. Tesla reports first-quarter earnings on 22 April 2026, so the next real test is whether management explains this as a temporary wobble or as part of a harder, more price-sensitive market.

Back to the driveway

Tesla’s reported cheaper model matters because it looks like a reality check. A lower-priced compact sport utility vehicle could help volumes, keep factories busier and give Tesla a better answer to Chinese rivals and to a more cautious buyer in Europe and the United States. It also comes with a catch the size of a showroom. Cheaper cars usually mean thinner margins, unless battery costs fall fast enough to compensate. That is why this is more than a Tesla story. It says the EV market is entering a phase where affordability may matter more than aspiration. Flashy launch events are nice. Monthly payments still tend to win arguments.

The broader electric vehicle backdrop is mixed rather than broken. Reuters reported that global EV registrations rose 3% in March 2026, with Europe up 37% to nearly 540,000 units, helped by higher petrol prices. North America, by contrast, fell 30% after the end of tax credits. That split is important. It shows that EV demand still responds to economics, but those economics now depend more on fuel prices, incentives and pricing discipline than on novelty alone. In other words, the market is growing up. Like all adults, it has started reading the energy bill.

Oil has entered the chat

This is where the current oil backdrop matters. Brent crude was around 94.93 USD a barrel on 15 April 2026, while West Texas Intermediate crude was around 91.29 USD, even after some cooling from earlier spikes. Physical oil grades briefly surged far above futures prices during the recent disruption around the Strait of Hormuz. For drivers, and therefore for carmakers, that means one thing: uncertainty at the pump is back. And when fuel becomes a headache, EVs and hybrids start looking less like ideology and more like maths.

That does not mean Tesla automatically wins. Higher oil prices can support EV demand, but they do not solve competition, financing costs or product fatigue. They simply improve the category’s pitch. For long-term investors, that is a useful distinction. Oil can lift interest in EVs, but only the right product mix, the right battery cost and the right manufacturing execution turn that interest into profits. This is one reason Tesla’s cheaper-car move matters now. It is a response to an EV market that may be helped by oil, but no longer rescued by excitement alone.

Why battery makers matter more now

If Tesla’s reported move is the reality check, CATL, or Contemporary Amperex Technology Co., is the second act. The Chinese battery giant beat first-quarter expectations this week, with profit up 48.5% year on year and revenue up 52.5%. Its share of the global electric vehicle battery market also climbed to 42.1% in early 2026, a reminder that more of the industry’s power is shifting toward the companies that control the battery bill. CATL’s own 2025 annual report said it held 39.2% of the global power battery market and 30.4% of global energy storage battery shipments. In February, it added another sign of where the market is heading, saying it would supply sodium-ion batteries for the world’s first mass-produced sodium-ion passenger car with Changan, due by mid-2026.

Why does that matter for Tesla and for investors looking at the wider EV chain? Because batteries are no longer a background component. They shape cost, charging speed, cold-weather performance, supply security and, increasingly, the balance of power in the industry. CATL is also reportedly considering another Hong Kong fundraising, which underlines a broader point: this industry still needs vast amounts of capital, and the companies providing the chemistry and scale may end up with more bargaining power than the brands selling the badge. Carmakers still sell the dream. Battery leaders increasingly control the economics.

The road can still get slippery

There are at least three risks to watch. First, Tesla’s cheaper-car pivot could help deliveries but pressure profitability if price cuts outrun cost savings. Second, oil could fall back quickly if geopolitics ease, which would soften one of the category’s current demand tailwinds. Third, battery leadership could make the EV market more unequal, with suppliers and low-cost manufacturers taking more value while premium carmakers fight harder for it. Early warning signs are straightforward: Tesla’s margin commentary on 22 April, inventory trends, battery pricing language from CATL, and whether Europe’s recent demand strength lasts once energy panic fades.

Investor playbook

Watch whether cheaper EVs expand demand, or simply move the same demand down-market.
Follow battery leaders as closely as car brands. The chemistry race now shapes the profit race.
Treat oil as a demand variable, not a magic wand. It can help adoption, but not fix execution.

Where the real EV battle sits

Tesla’s latest move brings the story back to the driveway. For all the talk of robotaxis, chips and humanoid robots, the near-term question is still whether Tesla can build a more affordable car that people want, at a margin investors can live with. That is why the CATL angle matters so much.

In this phase of the EV race, the winners may not be the companies with the loudest future story, but the ones with the best battery access, the lowest cost curve and the clearest answer to a simple customer question: why should I buy this now? In the electric age, the dream still matters. The battery bill may matter more.

This material is marketing content and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.

The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options.

Ruben Dalfovo

Investment Strategist

Saxo Bank

Topics: Macro Highlighted articles Tesla Motors Theme - Electric vehicles

Saxo Market Compass - 13 April 2026

Tue, 14 Apr 2026 04:16:00 Z

Saxo Weekly Market Compass – 13 April 2026

Geopolitics drove a full market cycle this week – from stress to relief and back to uncertainty.

Markets moved sharply through the week as tensions around the Strait of Hormuz first lifted oil and volatility, then a temporary ceasefire triggered a broad rally, before renewed escalation brought caution back. Inflation re-accelerated, central bank expectations shifted, and earnings season began to take focus. The key takeaway is simple: macro and geopolitics are again dominating price action across asset classes.

Equities

Relief rally met macro reality across regions.

United States: The S&P 500 gained 2.5% on 8 April as ceasefire hopes drove a sharp rotation into cyclicals, before stabilising into Friday as inflation and sentiment data cooled enthusiasm. Large-cap tech, including Amazon and Meta Platforms, remained supported by AI demand narratives.
Europe: Indices such as the DAX (+5.1%) and CAC 40 (+5.0%) rallied on falling energy prices, with industrial and consumer names leading the recovery.
Asia: Strong semiconductor-led gains from Samsung Electronics and Taiwan Semiconductor Manufacturing Company emerged early in the week before profit-taking emerged as macro uncertainty returned.

Market pulse: Equities remain reactive to energy and geopolitical shifts, with conviction still limited despite the mid-week surge.

Looking ahead – equities

Earnings take centre stage, with Goldman Sachs, JPMorgan Chase, and Bank of America setting the tone for financials. Tech leadership will be tested by ASML and Taiwan Semiconductor Manufacturing Company. Expect stock-level dispersion to rise as fundamentals begin to matter more alongside macro risk.

Volatility

Sharp compression followed by renewed tension.

VIX trajectory: Volatility started elevated, with the VIX at 24.17 early in the week, before dropping to around 21 mid-week and further to 19.49 by Friday as ceasefire hopes eased market stress.
Renewed pressure: Volatility began to rise again into the new week, with futures pointing higher near 22 as tensions resurfaced. Expected moves compressed significantly during the mid-week lull, reflecting a temporary stabilisation in sentiment.

Market pulse: Volatility eased, but remains highly headline-sensitive and vulnerable to fast reversals.

Looking ahead – volatility

Volatility is likely to stay reactive, with geopolitical headlines and earnings both acting as catalysts. A sustained move higher in oil or negative earnings surprises could quickly reprice short-term volatility, while stable conditions may keep VIX contained near current levels.

Options sentiment

Disciplined participation with a persistent hedging bias.

Options flow reflected controlled engagement rather than strong conviction. Index positioning showed steady demand for downside protection, while large-cap tech flows shifted toward spreads and overwrites instead of outright calls. Financials reinforced this pattern, with event-driven, defined-risk positioning dominating ahead of earnings.

In contrast, energy and metals saw more constructive flows, though consistently paired with hedging, highlighting conditional optimism rather than outright bullishness.

Market pulse: Investors stayed active, but prioritised risk-controlled exposure over directional bets.

Looking ahead – options sentiment

Earnings season will be the key driver of positioning. Expect continued use of spreads and structured trades, particularly in financials and tech, with implied volatility likely to rise around key events and skew remaining sensitive to macro risk.

Digital assets

Resilient, but still macro-driven.

Bitcoin: Traded between roughly $68k and $72k, holding steady despite sharp macro swings across other risk assets.
Ethereum and altcoins: Ethereum remained near $2.1k–$2.2k, while XRP and Solana showed selective strength. ETF flows remained supportive, with continued inflows into iShares Bitcoin Trust, while iShares Ethereum Trust flows were more cautious.

Crypto continues to behave as a high-beta extension of global risk sentiment rather than a standalone driver.

Market pulse: Crypto remains stable, but direction is macro-dependent.

Looking ahead – digital assets

Crypto will likely continue tracking broader risk sentiment. ETF flows remain the key signal to watch – sustained inflows could support further upside, while macro shocks or equity weakness could quickly pressure prices.

Fixed income

Yields whipsawed by inflation and energy dynamics.

US Treasuries: Yields rose early in the week, dropped sharply mid-week on easing energy fears, and then stabilised higher into Friday. The 10-year yield moved between roughly 4.24% and 4.35%, reflecting shifting expectations around inflation and monetary policy.
Policy outlook: Stronger CPI data reinforced a more cautious outlook for rate cuts, with markets reducing the number of anticipated cuts priced in for 2026.

Market pulse: Bond markets remain anchored to inflation expectations, with energy-driven CPI the dominant variable.

Looking ahead – fixed income

Focus shifts to central bank communication and inflation persistence. Any sustained rise in energy prices could push yields higher, while weaker data or dovish signals could stabilise the curve. Watch for commentary from Fed officials around the earnings period.

Commodities

Oil remained the dominant macro driver across asset classes.

Crude oil: Drove cross-asset moves throughout the week, rising above $110 early on, dropping below $100 on ceasefire hopes, and rebounding again as tensions escalated. The Strait of Hormuz remained the key risk channel, with supply disruption fears driving volatility in both directions.
Metals: Followed the broader risk sentiment, posting mid-week gains before stabilising. No independent catalyst emerged; metals moved in line with the macro mood.

Market pulse: Commodities, especially oil, remain central to macro risk transmission across all asset classes.

Looking ahead – commodities

Geopolitics will continue to dominate the oil price. Any disruption in shipping or supply through the Strait of Hormuz could push prices higher again, while signs of de-escalation may cap gains. Metals will likely track broader risk sentiment and global growth expectations.

Currencies

Dollar swings tracked geopolitics and rate repricing.

US dollar: Strengthened early in the week, weakened mid-week on risk-on sentiment from ceasefire hopes, and rebounded again into the weekend as tensions returned and inflation data supported yields.
Key pairs: EURUSD traded between roughly 1.15 and 1.17, while USDJPY remained elevated near 159–160. Commodity-linked currencies moved in line with oil prices, reflecting the energy-FX transmission channel.

Market pulse: FX markets remain driven by energy-linked inflation expectations and rate differentials.

Looking ahead – currencies

Currency moves will continue to reflect rate expectations and geopolitical developments. Watch for further volatility in USD pairs, particularly if inflation or energy dynamics shift again. USDJPY remains elevated and sensitive to any change in Fed guidance.

Key takeaways

Geopolitics drove rapid cross-asset swings, with ceasefire hopes mid-week triggering a sharp risk-on move that partially reversed as tensions resurfaced.
The S&P 500 gained 2.5% mid-week; European indices including the DAX (+5.1%) and CAC 40 (+5.0%) surged on falling energy costs.
The VIX moved from 24.17 to 19.49 over the week before futures pointed back toward 22, reflecting sustained headline sensitivity.
Options flows shifted to spreads and overwrites in tech and financials, reflecting disciplined, hedged positioning ahead of earnings.
Crude oil swung from above $110 to below $100 and back, with the Strait of Hormuz remaining the key risk channel.
US 10-year Treasury yields oscillated between 4.24% and 4.35%, driven by energy-linked inflation re-acceleration and shifting rate cut expectations.
Bitcoin held between $68k and $72k, with ETF inflows remaining supportive despite macro volatility elsewhere.
Earnings season begins: Goldman Sachs, JPMorgan Chase, Bank of America, ASML, and Taiwan Semiconductor Manufacturing Company are the key names to watch.

Looking ahead – week of 13 April to 17 April 2026

The dominant dynamic heading into the new week is the overlap of earnings season and persistent geopolitical risk. This is a structurally complex setup: corporate results can deliver fundamental anchors, but a single headline from the Strait of Hormuz can override earnings signals within hours. That combination makes for an unusually high-dispersion environment.

Key events this week centre on major financial sector earnings, with JPMorgan Chase, Goldman Sachs, and Bank of America reporting in the first half of the week. These results will set the tone for financials broadly and will be closely watched for commentary on credit conditions, consumer health, and trading revenues. Technology and semiconductors follow, with ASML and Taiwan Semiconductor Manufacturing Company reporting later in the week, testing whether AI-driven demand narratives remain intact. On the macro side, watch US retail sales and any Federal Reserve speakers for fresh guidance on the rate path.

The defining event remains geopolitical: any fresh escalation or de-escalation at the Strait of Hormuz will have immediate cross-asset implications, particularly for oil, USD pairs, and rate expectations. A sustained move in crude above $110 would likely put renewed pressure on equities and fixed income simultaneously, while a credible de-escalation could unlock the next leg of the relief rally seen mid-week.

Calendar highlights (times in GMT)

Mon 13 Apr – Markets reopen; watch weekend geopolitical developments and oil price gaps
Tue 14 Apr – JPMorgan Chase Q1 earnings; US retail sales (Mar)
Wed 15 Apr – Goldman Sachs Q1 earnings; Bank of America Q1 earnings; Federal Reserve Beige Book
Thu 16 Apr – ASML Q1 earnings; US initial jobless claims; Netflix Q1 earnings
Fri 17 Apr – Taiwan Semiconductor Manufacturing Company Q1 earnings; University of Michigan consumer sentiment

Concluding remarks

Markets ended the week stronger, but the underlying picture remains unstable. The rapid shift from stress to relief and back again highlights how dependent sentiment is on geopolitical developments, with oil functioning as the primary transmission mechanism across equities, fixed income, currencies, and crypto. Inflation pressures tied to energy are complicating the policy outlook, while earnings season now offers a potential anchor for fundamentals – but only if macro conditions allow the signal to come through.

For investors, this is a market that rewards discipline. Staying engaged while actively managing risk remains essential, as both opportunities and shocks can emerge quickly and with limited warning.

For a global look at markets – go to Inspiration.

Related articles/content
Saxo Market Compass - 16 March 2026 Saxo Market Compass - 9 March 2026 Global Markets are still only pricing for modest disruptions from Iran war (podcast) \| 9 March 2026 When markets look chaotic emotions matter more than portfolios \| 9 March 2026 Iran headlines market turbulence and options - a practical map of what to trade \| 4 March 2026 Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign \| 4 March 2026 Iran escalation The portfolio playbook \| 3 March 2026 Investor Q&A on the Iran-US conflict \| 2 March 2026 The Macro Take Iran conflict what to watch \| 2 March 2026 Saxo Market Compass - 2 March 2026 Iran escalation: Quick thoughts on markets \| 1 March 2026 Saxo Market Compass - 23 February 2026 Saxo Market Compass - 16 February 2026

Related articles/content

Saxo Market Compass - 16 March 2026

Saxo Market Compass - 9 March 2026
Global Markets are still only pricing for modest disruptions from Iran war (podcast) | 9 March 2026
When markets look chaotic emotions matter more than portfolios | 9 March 2026
Iran headlines market turbulence and options - a practical map of what to trade | 4 March 2026
Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign | 4 March 2026
Iran escalation The portfolio playbook | 3 March 2026
Investor Q&A on the Iran-US conflict | 2 March 2026
The Macro Take Iran conflict what to watch | 2 March 2026
Saxo Market Compass - 2 March 2026
Iran escalation: Quick thoughts on markets | 1 March 2026
Saxo Market Compass - 23 February 2026
Saxo Market Compass - 16 February 2026

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

ASML earnings: is the 8% move already priced in?

Fri, 10 Apr 2026 09:06:00 Z

ASML earnings: is the 8% move already priced in?

ASML reports earnings on 15 April, and options markets are already pricing a move of roughly 8% in either direction. In this video I explain how to read that implied move, why direction alone is rarely enough in earnings trades, and how three different option structures – a bull call spread, a bear put spread, and an iron condor – each express a different view while keeping risk defined. I also cover the most common mistakes traders make around earnings events, and the key questions to ask before placing any position. Watch to get the full framework before the numbers drop.

This video covers the key concepts. For a deeper, step-by-step walkthrough of the strategies and how they are constructed, including practical examples, refer to the full article: ASML earnings - how to think about the setup before the numbers

Related articles/content
ASML earnings - how to think about the setup before the numbers \| 10 Apr 2026 Iran headlines market turbulence and options - a practical map of what to trade \| 4 Mar 2026 NVDA earnings and the post-print volatility crash - an options case study \| 23 Feb 2026 When markets sell off - a calm options traders playbook \| 6 Feb 2026 Diagonal spreads explained - a walkthrough using SLV as a case study \| 3 Feb 2026 Earnings week playbook - Novo Nordisk Alphabet and Amazon \| 2 Feb 2026 Microsoft MSFT pre-earnings scorecard - 26 January 2026 Intel INTC pre-earnings scorecard - 19 January 2026 \| 20 Jan 2026 Trading silver via SLV when volatility refuses to calm down \| 19 Jan 2026 The Venezuela oil shock - Trading the reconstruction without chasing the hype \| 6 Jan 2026 When the tail wags the dog - using options data to understand stock moves \| 19 Dec 2025 Position management for covered calls and cash-secured puts \| 18 Dec 2025 Guide on long-term options for strategic portfolio management Assignment explained - 01 - what every options trader and investor should know Assignment explained - 02 - how to avoid assignment Assignment explained - 03 - how to use option assignment to your advantage Assignment explained - 04 - option assignment cheat sheet

Related articles/content

ASML earnings - how to think about the setup before the numbers | 10 Apr 2026

Iran headlines market turbulence and options - a practical map of what to trade | 4 Mar 2026
NVDA earnings and the post-print volatility crash - an options case study | 23 Feb 2026
When markets sell off - a calm options traders playbook | 6 Feb 2026
Diagonal spreads explained - a walkthrough using SLV as a case study | 3 Feb 2026
Earnings week playbook - Novo Nordisk Alphabet and Amazon | 2 Feb 2026
Microsoft MSFT pre-earnings scorecard - 26 January 2026
Intel INTC pre-earnings scorecard - 19 January 2026 | 20 Jan 2026
Trading silver via SLV when volatility refuses to calm down | 19 Jan 2026
The Venezuela oil shock - Trading the reconstruction without chasing the hype | 6 Jan 2026
When the tail wags the dog - using options data to understand stock moves | 19 Dec 2025
Position management for covered calls and cash-secured puts | 18 Dec 2025

Guide on long-term options for strategic portfolio management
Assignment explained - 01 - what every options trader and investor should know
Assignment explained - 02 - how to avoid assignment
Assignment explained - 03 - how to use option assignment to your advantage
Assignment explained - 04 - option assignment cheat sheet

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Options Highlighted articles En hurtig tanke Macro ETF Theme - Artificial intelligence Getting Started with Options Contract Options Equity Options Investing with options Options education What are your options Listed Options Option Strategies Defined risk strategies Bearish strategies Bullish strategies Range‑bound strategies Volatility and event strategies

Saxo Market Compass - 30 March 2026

Mon, 30 Mar 2026 18:00:00 Z

Saxo Weekly Market Compass – 30 March 2026

Iran’s grip on the Strait of Hormuz delivered a week of whiplash – and markets finished lower.

The Iran war entered its fourth week as the dominant force across every asset class. Monday’s 48-hour ultimatum triggered a broad selloff; Tuesday’s delayed-strike announcement sparked a one-day relief rally; Wednesday’s US 15-point peace proposal briefly lifted sentiment; and Iran’s formal rejection of those terms on Thursday sent equities sharply lower once more. The net result: S&P 500 down for the week, Brent crude near USD 110, global bond yields at cycle highs, the VIX at 27.44, and gold testing its 200-day moving average. Traditional safe-haven correlations broke down – gold fell, the yen weakened despite rising Japanese yields, and institutional options flow was defensively positioned without exception across all five sessions.

Equities

A week of two halves – brief diplomatic relief swallowed by fresh escalation.

USA: The S&P 500 fell 1.5% Monday, rallied 1.2% to 6,581 Tuesday, then dropped 1.7% to 6,477 Thursday as Iran rejected the US peace plan; the Nasdaq lost 2.4% to 21,408 the same day. Chipmakers bore the brunt – Nvidia −4.2%, AMD −7.5%, Intel −6.5% – while Valero rose 5.8% as energy was the week’s only consistent sector winner. Super Micro tumbled 33% on chip-smuggling charges.
Europe: ASML outperformed on SK Hynix’s USD 8bn equipment order. Vestas gained 6% on fresh US project orders; Pandora rose 9.2% on lower precious-metal costs. Edenred fell 17.2% after an Italian antitrust probe. Boliden collapsed 20% on mine disruption; Telecom Italia gained 4.7% on a Poste Italiane bid. The FTSE 100 lost 1.3% Thursday.
Asia: South Korea’s KOSPI fell 6.5% Monday – Samsung −4.7%, SK Hynix −6.2% – while Japan’s Nikkei dropped 3.5% before partially recovering mid-week.

Market pulse: Equities are geopolitics-led; any sustained recovery requires credible Iran de-escalation, not just a one-day diplomatic headline.

Looking ahead – equities

Nike earnings on Tuesday 31 March are the week’s key corporate event and an early consumer-demand test. Q1 ends Tuesday – expect rebalancing flows. The April 6 Iran deadline is the dominant binary for equity direction. NFP releases Good Friday to closed markets; the full equity reaction defers to Monday 6 April, the same morning the Iran deadline expires.

Volatility

VIX holds above 27 – geopolitics, not earnings, runs this vol market.

The VIX closed the week at 27.44, anchored entirely to geopolitical headlines. Short-term measures (VIX1D) briefly dipped below 20 during Tuesday’s relief before spiking again as Iran rejected the US plan. Options markets priced an S&P 500 expected weekly move of approximately 178 points (2.74%) at Monday’s open, narrowing to around 80 points (1.2%) by Friday’s close as expiry positioning compressed. Near-the-money calls occasionally traded marginally richer than puts – signalling uncertainty about direction rather than outright fear of an imminent crash.

Market pulse: Volatility stays elevated and range-bound until the Iran situation resolves; the April 6 deadline is the next hard event horizon.

Looking ahead – volatility

Iran’s April 6 deadline creates a hard VIX event. Dealers’ short-put inventory from the week’s protection buying structurally reinforces downside pressure. A credible ceasefire signal could collapse implied vol rapidly; escalation pushes VIX toward 35+. The VIX term structure – front-month elevated but well below spot – is pricing a specific event window, not open-ended fear.

Options sentiment

Protection first, conviction a distant second – across every segment.

All five sessions pointed in the same direction: investors leaned defensive. Index and broad-market hedging was consistent throughout, and the largest technology stocks attracted downside protection on every session from Tuesday onward. Selective long-horizon call buying was present in a handful of names, but it never came close to offsetting the protective tone.

The sector picture added nuance. Energy started the week with genuine upside appetite in selected names, but that eroded steadily and closed on a clearly defensive note. Precious metals swung sharply, with a constructive mid-week session sandwiched between bearish ones; the week still ended on the defensive side. Financials split the room: meaningful protection and genuine accumulation both appeared in size, with no clear sector consensus emerging.

Market pulse: Investors did not abandon exposure, but they consistently paid for insurance – in every segment, across every session.

Looking ahead – options sentiment

April 17 is the dominant expiry horizon. The weight of accumulated downside hedging across indices and growth names creates a structural amplifier on any weak session. A credible Iran de-escalation is the clearest path to rapid protection unwinding and vol compression. Until that signal arrives, the defensive positioning bias is likely to persist.

Digital assets

Crypto tracked equities all week – no safe-haven function on offer.

Bitcoin ranged USD 67,800–71,000 before closing near USD 68,600; Ether held between USD 2,035 and 2,166. Both tracked equities without divergence. US spot Bitcoin ETFs recorded a USD 171M net outflow on 26 March (IBIT −$42M); Ether ETFs lost USD 92M total (ETHA −$140M, partly offset by other products). Coinbase, MicroStrategy, and most miners remained under pressure; Marathon Digital announced Bitcoin sales to reduce debt. XRP and Solana drifted lower throughout.

Market pulse: Bitcoin shows relative strength within crypto, but institutional conviction remains absent until macro and geopolitical conditions stabilise.

Looking ahead – digital assets

April 6 is as binary for crypto as for equities – de-escalation could quickly restore risk appetite with Bitcoin as the first beneficiary. Monitor weekly IBIT and ETHA flows: a return to sustained positive IBIT inflows is the clearest signal of institutional re-engagement. Ethereum’s underperformance versus Bitcoin will persist until ETH ETF flows reverse.

Fixed income

Bond markets are pricing a rate hike – not a cut – for the first time this cycle.

US: The 2-year Treasury yield surged 10bps Thursday to 3.98% – its highest this cycle – with futures now pricing a hike rather than a cut as oil-driven inflation dominates. The 10-year closed at 4.42%; the 2–10 spread flattened to below 45bps from 73bps in early February.
Europe: Germany’s 2-year Schatz rose 11bps in a single session to 2.715% (highest since mid-2024); the 10-year Bund hit its highest close since 2011 at 3.07%. The Germany–France 10-year spread widened to 71bps, the year’s widest.
Japan: The 2-year JGB reached 1.386% – highest since 1996 – with markets pricing >65% odds of a BoJ hike at the late-April meeting.

Market pulse: Energy-driven inflation has reasserted itself as the dominant macro force, overriding every other central bank consideration globally.

Looking ahead – fixed income

Eurozone flash CPI Tuesday 31 March (consensus 2.5%) will confirm oil-shock pass-through; an upside surprise pushes Bund yields higher. Germany CPI Monday is the first read. NFP on Good Friday defers the full bond-market reaction to Monday 6 April. The BoJ’s late-April meeting is increasingly priced to deliver a 25bp hike.

Commodities

Brent’s record monthly advance is reshaping every other asset class in its image.

Energy: Brent crude surged toward USD 110 Thursday, logging a near-44% monthly advance – a record. Around 1,000 vessels remain stranded in the Gulf due to war-risk insurance withdrawals. Singapore jet fuel hit USD 222/barrel (+137% since the war began); the gasoil–Brent spread exceeded the 2022 Russia-shock peak. The Bloomberg Commodity Index is up 31% year-on-year.
Gold: Gold tested its 200-day moving average at USD 4,113 as ETF outflows hit 85 tonnes for the month (−2.7% of holdings) – the metal is trading as a liquidity asset, not a safe haven.
Agriculture: Persian Gulf fertiliser disruptions are already curtailing Australian wheat plantings.

Market pulse: The supply shock is structural – until Hormuz reopens meaningfully, energy prices and their inflationary knock-ons will continue to define the macro backdrop.

Looking ahead – commodities

April 6 is the key catalyst: credible de-escalation could trigger a sharp Brent reversal and a gold recovery as the liquidity-selling dynamic reverses. OPEC+ spare capacity to offset Hormuz disruption is limited – watch Saudi Arabia and UAE for any output signals. Fertiliser shortages will increasingly feed into agricultural supply balances from April planting decisions onward.

Currencies

Safe havens in disarray – neither the dollar nor the yen is offering clean shelter.

USDJPY: Reached 159.85 as Japan’s energy dependence on Hormuz supply weighed heavily on the yen; Japan’s Ministry of Finance warned of “bold actions” before the pair retreated below 159.60. Rising JGB yields would normally support the yen, but the energy-import shock offsets that, keeping USDJPY close to intervention levels.
EURUSD: Hit a Thursday low of 1.1520, recovering to 1.1550 by Friday.
AUDUSD: Fell to 0.6872 – its lowest since late January – on weaker risk sentiment and softer Australian February CPI (3.7% YoY vs. 3.8% expected). The Swiss franc also lost safe-haven appeal.

Market pulse: Currency safe-haven hierarchies are being rewritten by the Iran shock; USDJPY near 160 remains the most important technical level in G10 FX.

Looking ahead – currencies

Any fresh USDJPY push toward 160 will re-trigger MoF intervention concern. Eurozone CPI Tuesday directly affects EUR positioning. NFP defers the full dollar reaction to Monday 6 April. AUDUSD has meaningful recovery potential in an Iran de-escalation scenario; further escalation targets early-February lows near 0.6944.

Key takeaways

S&P 500 and Nasdaq finished the week lower; Thursday alone saw S&P −1.7% to 6,477 and Nasdaq −2.4% to 21,408 on Iran’s rejection of the US peace plan. Nvidia −4.2%, AMD −7.5%, Intel −6.5%.
VIX closed at 27.44; options flow was defensively positioned all five sessions – institutional put demand in SPY, QQQ, and high-beta single names throughout the week without exception.
Bitcoin closed near USD 68,600, tracking equities; spot ETF outflows confirmed absent institutional conviction (IBIT −$42M, ETHA −$140M on 26 March alone).
US 2-year yield hit 3.98% (cycle high); Germany 2-year Schatz 2.715% (highest since mid-2024); Japan 2-year JGB 1.386% (highest since 1996). Bond markets are pricing a hike, not a cut.
Brent crude logged a near-44% monthly advance – a record. Bloomberg Commodity Index +31% year-on-year. Singapore jet fuel at USD 222/barrel, up 137% since the war began.
Gold tested its 200-DMA at USD 4,113; ETF outflows hit 85 tonnes for the month. The metal is trading as a liquidity instrument, not a safe haven.
USDJPY reached 159.85 – one step from MoF intervention. Japan’s energy dependence on Hormuz is the structural driver of yen weakness despite rising JGB yields.

Looking ahead – week of 30 March to 3 April 2026

The week is shaped by one inescapable fact: Trump’s revised April 6 Iran deadline arrives next Monday with negotiations stalled. Markets will price de-escalation versus escalation probabilities throughout the week, keeping cross-asset correlations unstable.

Germany CPI on Monday 30 March provides the first G7 inflation read of the week; Eurozone flash CPI follows on Tuesday 31 March (consensus 2.5%) – an upside surprise could force ECB hawkishness back onto the table. Tuesday also marks Q1-end, with portfolio-rebalancing flows likely to amplify intraday moves. Nike reports earnings Tuesday as the week’s key corporate event. ISM Manufacturing on Wednesday 1 April (consensus 52.3 versus prior 52.4) will be the first April factory read; any deceleration alongside elevated input costs reinforces stagflation concerns.

The defining data point arrives Good Friday 4 April: US Nonfarm Payrolls (consensus +57,000 after February’s −92,000 shock; unemployment expected at 4.4%). Equity and bond markets are closed for Easter. The full reaction therefore compresses into Monday 6 April – the same morning the Iran deadline formally expires. Two binary events stacked on a single Monday open: keep liquidity available and position accordingly.

Calendar highlights (times in GMT)

Mon 30 Mar – Germany CPI (Mar, prelim)
Tue 31 Mar – Eurozone flash CPI (Mar, consensus 2.5%); Q1-end; Nike earnings (NKE)
Wed 1 Apr – ISM Manufacturing (consensus 52.3)
Fri 4 Apr – US Nonfarm Payrolls (markets closed, Good Friday)
Mon 6 Apr – NFP market reaction + Trump Iran deadline expires

Concluding remarks

The week of 23 to 27 March confirmed that the Iran war has fractured traditional macro correlations: gold is selling off, the yen is weakening despite rising yields, and bond markets are pricing rate hikes in a slowing economy. The Hormuz supply shock is structural – stranded vessels, fertiliser shortages, and record refined-fuel margins are not temporary features. With the April 6 deadline approaching and talks stalled, the outcome range remains unusually wide. Maintaining diversification, keeping hedge costs in check, and preserving liquidity for a potentially historic Monday 6 April open is the most defensible posture heading into the Easter break.

For a global look at markets – go to Inspiration.

Related articles/content
Saxo Market Compass - 16 March 2026 Saxo Market Compass - 9 March 2026 Global Markets are still only pricing for modest disruptions from Iran war (podcast) \| 9 March 2026 When markets look chaotic emotions matter more than portfolios \| 9 March 2026 Iran headlines market turbulence and options - a practical map of what to trade \| 4 March 2026 Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign \| 4 March 2026 Iran escalation The portfolio playbook \| 3 March 2026 Investor Q&A on the Iran-US conflict \| 2 March 2026 The Macro Take Iran conflict what to watch \| 2 March 2026 Saxo Market Compass - 2 March 2026 Iran escalation: Quick thoughts on markets \| 1 March 2026 Saxo Market Compass - 23 February 2026 Saxo Market Compass - 16 February 2026

Related articles/content

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 23 March 2026

Mon, 23 Mar 2026 17:30:00 Z

Saxo Weekly Market Compass

23 March 2026 (recap week of 16 to 20 March 2026)

Headlines & introduction

Markets spent last week repricing a single dominant theme: energy-driven inflation risk colliding with a less accommodative policy outlook. Early-week relief faded as oil volatility and the Fed’s higher-for-longer stance pushed investors back into defensive positioning.

By Friday, the shift was clear. Equities weakened, bond yields surged, and volatility remained elevated, with macro risks firmly back in control of cross-asset direction.

Market pulse: sentiment rotated from cautious optimism to inflation-driven defensiveness.

Equities

A fragile rebound gave way to a broad risk reset.
US equities opened stronger, with the S&P 500 up 1.0% (16 Mar) as oil eased and AI names supported sentiment. That strength faded quickly, with a 1.4% decline (18 Mar) after the Fed reinforced a limited easing path, followed by continued pressure into Friday as oil and yields climbed.

Europe and Asia were more exposed to the energy shock. The STOXX 600 fell 2.4% (19 Mar), while Japan and Korea posted sharp declines late in the week as higher energy costs raised concerns around growth and margins.

Market pulse: equities are no longer pricing growth— they’re pricing inflation risk.

Looking ahead
Focus shifts to whether macro pressure feeds into earnings expectations. GameStop and retail-linked names will test risk appetite, while housing (KB Home) and payroll-linked earnings (Paychex) offer insight into consumer resilience. If oil stabilises, equities may find footing; if not, downside risk remains skewed toward cyclicals and Europe.
A potential de-escalation in the Middle East adds a new layer to the outlook. The sharp rebound in equities on easing headlines highlights how sensitive markets remain to oil-driven inflation expectations; however, conflicting signals suggest any relief may remain headline-driven rather than durable.

Volatility

Volatility remained elevated, driven by macro rather than panic.
The VIX dropped to 23.51 (16 Mar) before rising to 25.09 (18 Mar) as Fed uncertainty and energy risks intensified. Short-term measures confirmed persistent demand for protection around macro catalysts.

By Friday, volatility eased slightly after expiry-related flows, but the broader regime remains elevated, with options still pricing meaningful index moves and sensitivity to headlines.

Market pulse: volatility is stable, but structurally elevated and macro-driven.

Looking ahead
Key triggers shift from central banks to data. PMI, jobless claims, and consumer sentiment will determine whether realised volatility catches up with implied. If oil stabilises, vol could compress; if macro surprises persist, short-dated vol is likely to reprice higher first.
The sharp cross-asset reversal on de-escalation headlines reinforces that volatility remains event-driven. Short-dated measures are likely to stay sensitive to geopolitical news, with rapid repricing in either direction.

Options sentiment

Protection remained dominant, but markets did not fully de-risk.
Across the week, options flow continued to favour downside protection, particularly in the largest growth names where confirmed-opening hedging structures dominated. That points more to ongoing risk management than outright bearish conviction, as investors maintained exposure while guarding against macro shocks. The shift was most visible mid-week, as oil and rate uncertainty intensified and demand for protection increased.

Outside of tech, positioning was more balanced. Energy and metals retained constructive flows, especially in selected equities and miners, but upside participation was consistently paired with hedging. Financials added a different dynamic, with flow skewed toward income strategies, suggesting expectations of range-bound conditions rather than strong directional moves.

Market pulse: investors stayed invested, but conviction remained selective and consistently hedged.

Looking ahead
Watch whether protection demand persists into a lighter macro week. A decline in hedging flow — especially in large-cap growth — would signal stabilisation, while continued put demand or short-dated hedging would confirm that macro risk is still dominating positioning.
A sustained easing in geopolitical risk could prompt partial unwinding of downside protection, but uncertainty around the durability of any de-escalation suggests investors may continue to favour hedged structures.

Digital assets

Crypto tracked macro, with bitcoin showing relative strength.
Bitcoin held near $74K early in the week before drifting toward the $67–70K range, outperforming Ethereum and altcoins, which showed clearer weakness. ETF flows turned from supportive to mixed-to-negative, reflecting more cautious institutional positioning.

Options activity confirmed this tone, with hedging in crypto-linked equities and ETF products limiting upside conviction.

Market pulse: bitcoin remains resilient, but broader crypto sentiment is fragile.

Looking ahead
Crypto direction will hinge on macro stability, not crypto-specific catalysts. Watch ETF flows closely—renewed inflows would signal re-risking, while continued outflows would confirm a defensive regime. Correlation with equities remains high.

Fixed income

Bond markets repriced sharply toward inflation risk.
Yields fell early in the week before reversing decisively. The US 10-year moved from around 4.23% (16 Mar) to above 4.40% by Friday, while the 2-year approached 3.90%, reflecting a shift toward higher-for-longer expectations.

European yields followed, with Bund yields above 3.00%, as markets reconsidered the ECB path amid energy-driven inflation concerns.

Market pulse: bonds have moved from pricing cuts to defending against inflation.

Looking ahead
Import price data and consumer sentiment will be critical. Any sign that energy costs are feeding into inflation expectations could push yields higher again. Conversely, softer data could stabilise rates, particularly at the long end.
Lower oil prices could ease inflation expectations and provide temporary relief for bond yields, but durability depends on whether energy markets stabilise.

Commodities

Energy strength and metals weakness defined the week.
Oil remained elevated, with supply disruptions reinforcing inflation concerns despite intermittent pullbacks. Refined products continued to signal tightness, confirming that the shock is structural rather than headline-driven.

Metals moved in the opposite direction. Gold broke below key levels and saw a sharp decline, while copper and silver weakened on growth concerns and liquidation pressure.

Market pulse: commodities split—energy signals inflation, metals signal stress.

Looking ahead
The key variable remains Middle East developments and supply flows. Oil direction will dictate cross-asset sentiment. Watch refinery margins and diesel spreads—these remain the clearest indicators of real supply stress.
The recent sharp drop in oil on de-escalation signals shows how quickly supply risk can be repriced, but disrupted flows and tight product markets suggest volatility will remain elevated even if tensions ease.

Currencies

FX markets reflected rates and commodities, not classic safe havens.
The US dollar weakened early in the week before recovering as yields rose. EURUSD traded in wide ranges, while USDJPY remained volatile amid yield shifts and central bank positioning.

Safe-haven behaviour was inconsistent. The Swiss franc failed to attract strong flows, while the Norwegian krone strengthened on energy exposure, highlighting the dominance of rate and commodity dynamics.

Market pulse: FX is driven by yield spreads and energy exposure, not risk aversion alone.

Looking ahead
Watch rate differentials and commodity moves. Energy-linked currencies remain sensitive to oil, while USD direction will depend on yields. Any stabilisation in rates could weaken the dollar again.

Key takeaways

Energy shock reshaped inflation expectations across markets.
Equities weakened globally, with Europe and Asia most exposed.
Volatility elevated, driven by macro rather than panic.
Options flow defensive, but not capitulative.
Bond yields surged, repricing policy expectations.
Commodities diverged sharply between energy and metals.
FX driven by rates and commodities, not classic safe havens.

Conclusion

Last week confirmed that markets are no longer trading on isolated themes. Energy, inflation, and policy are now tightly linked, and that linkage is driving cross-asset behaviour.

The next phase depends less on central banks and more on whether macro data confirm that the energy shock is feeding into the real economy. Until then, markets are likely to remain reactive, selective, and structurally hedged.

Related articles/content
Saxo Market Compass - 16 March 2026 Saxo Market Compass - 9 March 2026 Global Markets are still only pricing for modest disruptions from Iran war (podcast) \| 9 March 2026 When markets look chaotic emotions matter more than portfolios \| 9 March 2026 Iran headlines market turbulence and options - a practical map of what to trade \| 4 March 2026 Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign \| 4 March 2026 Iran escalation The portfolio playbook \| 3 March 2026 Investor Q&A on the Iran-US conflict \| 2 March 2026 The Macro Take Iran conflict what to watch \| 2 March 2026 Saxo Market Compass - 2 March 2026 Iran escalation: Quick thoughts on markets \| 1 March 2026 Saxo Market Compass - 23 February 2026 Saxo Market Compass - 16 February 2026

Related articles/content

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 16 March 2026

Mon, 16 Mar 2026 19:00:00 Z

Saxo Weekly Market Compass

16 March 2026 (recap week of 9 to 13 March 2026)

Headlines & introduction

Energy risk reshaped the macro narrative. Markets spent the week reacting to renewed Middle East tensions and a sharp rebound in oil prices, pushing inflation risks back into focus and triggering repricing across assets. Equities moved in waves of relief rallies and renewed risk aversion, while bond yields climbed and volatility stayed elevated.

Digital assets held relatively firm and options flows showed investors maintaining exposure but increasingly adding portfolio hedges. With oil volatility now feeding directly into inflation expectations and policy outlooks, investors ended the week cautious and focused on the next round of macro catalysts.

Equities

What happened

AI strength balanced oil-driven macro fears. US equities swung between optimism and caution. The S&P 500 rose early in the week before retreating as Brent crude moved back toward the $100 area and Treasury yields climbed.

Technology remained the strongest pocket of the market. Oracle rallied on AI-related guidance, while semiconductor names such as Nvidia, Intel and Micron benefited from continued demand tied to AI infrastructure spending.

Outside the US, European and Asian equities proved more sensitive to energy shocks. The STOXX 600 rebounded early in the week before oil-driven inflation fears returned. Semiconductor leaders such as ASML and Infineon rallied early, while energy majors including Shell and BP benefited from higher crude prices.

Market pulse: AI remains a structural support for equities, but oil prices are driving short-term sentiment.

Looking ahead

Equity markets now face a catalyst-heavy week. The Federal Reserve decision and Chair Powell’s press conference will influence rate expectations, while Micron’s earnings will test whether the AI investment cycle remains intact.

Investors will also watch consumer-facing earnings and global trade signals from companies such as FedEx and Dollar Tree. Together with oil prices, these developments could determine whether equities stabilise or remain headline-driven.

Volatility

What happened

Geopolitics kept volatility elevated. Market volatility remained firm as geopolitical risk drove trading behaviour. The VIX hovered near the high‑20s during the week, while short-dated volatility indicators stayed elevated as investors continued buying protection against sudden market moves.

Options pricing suggested sizeable expected index swings as markets reacted to oil price volatility and geopolitical uncertainty. Rather than fading, volatility remained structurally supported by macro risk.

Market pulse: volatility stayed elevated as geopolitics replaced macro data as the main market driver.

Looking ahead

The upcoming Federal Reserve decision could become the next volatility catalyst. Powell’s comments on inflation and energy-driven price pressures will likely influence volatility expectations across equities and rates.

If oil markets stabilise, volatility may gradually decline. Continued geopolitical uncertainty, however, could keep volatility elevated.

Options sentiment

What happened

Options flow prioritised portfolio protection. Options activity showed consistent demand for downside hedging across indices, financials and rate-sensitive ETFs. Institutional investors appeared focused on protecting portfolios against macro shocks rather than positioning aggressively for upside.

Commodity-related options presented a more balanced picture. Energy producers attracted selective upside positioning, while metals miners saw accumulation-style flows reflecting ongoing interest in precious metals.

Market pulse: investors stayed invested but layered systematic hedges across macro-sensitive sectors.

Looking ahead

Options positioning will likely react to upcoming macro catalysts. Central-bank communication and inflation data could influence hedging demand, particularly in rate-sensitive sectors.

If geopolitical risks persist, demand for downside protection across indices and financials may remain elevated.

Digital assets

What happened

Crypto proved resilient amid macro turbulence. Digital assets held up relatively well compared with equities. Bitcoin traded near the $70k range during much of the week before rising toward the mid‑$70k area late in the period.

Institutional demand remained a key driver. Spot Bitcoin ETFs recorded fresh inflows during the week, while Ethereum-linked products also attracted demand.

Market pulse: ETF demand continues to anchor institutional interest in crypto.

Looking ahead

Crypto markets will likely track broader liquidity conditions and risk sentiment. A more hawkish tone from the Federal Reserve or rising bond yields could pressure digital assets in the short term.

However, continued ETF inflows and institutional adoption remain supportive structural factors.

Fixed income

What happened

Bond markets repriced inflation risk. Government bond yields moved higher during the week as rising oil prices revived inflation concerns. US Treasury yields climbed as markets priced fewer near-term rate cuts.

European yields also rose as investors reassessed inflation risks linked to energy prices. Credit spreads widened briefly before stabilising, reflecting more cautious risk appetite.

Market pulse: bond markets are adjusting to a renewed inflation narrative.

Looking ahead

The Federal Reserve meeting will be the key driver for bond markets. Any signal that policymakers are concerned about energy-driven inflation could push yields higher.

Inflation data and economic indicators will also help determine whether markets continue to price fewer rate cuts.

Commodities

What happened

Oil dominated the commodity complex. Energy markets led commodity moves as supply disruptions near the Strait of Hormuz pushed Brent crude toward the $100–$105 range.

Strategic reserve releases were coordinated in response to the disruption, highlighting the scale of supply risks. Precious metals showed mixed performance as safe-haven demand competed with rising yields and a stronger dollar.

Market pulse: oil became the central macro variable for global markets.

Looking ahead

Energy markets will remain the key variable for commodities. Investors will closely monitor geopolitical developments and the impact of reserve releases on global supply conditions.

Gold and silver may continue reacting to interest-rate expectations and dollar strength rather than pure safe-haven demand.

Currencies

What happened

Dollar strength returned on safe-haven demand. Currency markets reflected rising risk aversion. The US dollar strengthened during the week, while the euro weakened as energy risks weighed on European sentiment.

The Japanese yen hovered near intervention-sensitive levels against the dollar, while commodity currencies showed mixed performance.

Market pulse: FX markets reacted primarily to energy risk and safe-haven flows.

Looking ahead

Currency markets will focus on the Federal Reserve decision and evolving interest-rate expectations.

Energy price developments may continue influencing currency performance, particularly for energy-importing economies such as Europe and parts of Asia.

Conclusion

The week demonstrated how quickly geopolitical shocks can reshape financial markets through energy prices. Oil’s rebound revived inflation concerns and triggered repricing across equities, bonds and currencies.

Investors have not abandoned risk assets, but positioning has become more cautious, with increased hedging across macro-sensitive sectors. With central-bank decisions, inflation data and major earnings ahead, markets enter the new week balancing structural growth themes with heightened macro uncertainty.

Related articles/content
Saxo Market Compass - 9 March 2026 Global Markets are still only pricing for modest disruptions from Iran war (podcast) \| 9 March 2026 When markets look chaotic emotions matter more than portfolios \| 9 March 2026 Iran headlines market turbulence and options - a practical map of what to trade \| 4 March 2026 Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign \| 4 March 2026 Iran escalation The portfolio playbook \| 3 March 2026 Investor Q&A on the Iran-US conflict \| 2 March 2026 The Macro Take Iran conflict what to watch \| 2 March 2026 Saxo Market Compass - 2 March 2026 Iran escalation: Quick thoughts on markets \| 1 March 2026 Saxo Market Compass - 23 February 2026 Saxo Market Compass - 16 February 2026

Related articles/content

Saxo Market Compass - 9 March 2026

Global Markets are still only pricing for modest disruptions from Iran war (podcast) | 9 March 2026
When markets look chaotic emotions matter more than portfolios | 9 March 2026
Iran headlines market turbulence and options - a practical map of what to trade | 4 March 2026
Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign | 4 March 2026
Iran escalation The portfolio playbook | 3 March 2026
Investor Q&A on the Iran-US conflict | 2 March 2026
The Macro Take Iran conflict what to watch | 2 March 2026
Saxo Market Compass - 2 March 2026
Iran escalation: Quick thoughts on markets | 1 March 2026
Saxo Market Compass - 23 February 2026
Saxo Market Compass - 16 February 2026

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 9 March 2026

Mon, 09 Mar 2026 18:00:00 Z

Saxo Weekly Market Compass –
the Iran shock rewrites the market narrative

9 March 2026 (recap week of 2 to 6 March 2026)

Headlines & introduction

A geopolitical shock became a macro shock.

The week of 2 to 6 March began as a geopolitical story and ended as a full market repricing. As tensions involving Iran escalated and disruption around the Strait of Hormuz pushed energy prices sharply higher, investors were forced to reassess inflation, growth and the path of central bank policy.

That shift was felt across asset classes. Equities swung between relief rallies and renewed selloffs, bond yields moved higher, volatility stayed elevated and the US dollar regained safe-haven support. By the end of the week, markets were no longer treating the conflict as a regional event, but as a potential global inflation and growth shock.

Timeline of market reactions to the Iran shock: equities weaken early in the week, oil and yields rise mid-week, volatility spikes by Friday, and markets enter the new week focused on the oil surge, US inflation data and key earnings catalysts. Source: Saxo

Equities

Equities traded less on fundamentals and more on the price of disruption.

In the US, markets spent the week reacting to oil, yields and geopolitics rather than following a clean earnings-led script. The S&P 500 was roughly flat on 2 March, fell 0.9% on 3 March, rebounded 0.8% on 4 March, and then lost momentum again as oil prices rose and the labour-market backdrop softened into week-end. Technology names still offered selective support, with AI-linked companies such as Nvidia, AMD, Broadcom and Marvell attracting buying interest on company-specific developments, but that leadership was not enough to stabilise the broader market.

Outside the US, the Iran shock was even more visible. European equities were hit by renewed concerns over imported energy costs, with the STOXX 600 falling 1.6% on 2 March and a further 3.1% on 3 March before a mid-week rebound. The FTSE 100 was relatively more resilient thanks to its energy exposure, while continental markets were weighed down by industrials, transport and cyclicals. In Asia, South Korea saw the most violent swings, Japan remained vulnerable as an energy importer, and Hong Kong held up better as large-cap technology names offset some of the wider pressure.

Market pulse: equities increasingly traded as a function of oil, inflation and geopolitical risk rather than company fundamentals.

Options sentiment

The options market pointed to protection first, conviction second.

Across the week, options activity showed a clear preference for downside protection. Broad market positioning leaned defensive, with persistent hedging in index exposure and a more cautious tone in high-beta growth areas. The message from the largest growth stocks also deteriorated through the week, as investors increasingly favoured defensive structures over straightforward upside participation.

The more nuanced picture appeared in energy and metals. In energy, investors still showed willingness to own upside in selected names, but broad sector exposure remained hedged. In metals, positioning stayed constructive, particularly in miners, but was paired with downside protection in the large precious-metals ETFs. Taken together, the signal was not capitulation. It was a market that remained invested, but wanted much more insurance.

Market pulse: investors did not abandon risk, but they consistently paid to protect against further instability.

Volatility

Volatility rose because oil turned geopolitics into policy risk.

The week’s volatility profile stayed elevated throughout. The VIX closed at 21.44 on 2 March, rose to 23.57 on 3 March, eased to 21.15 on 4 March, and then closed Friday at 29.49 as the weekend escalation drove another round of demand for near-term hedges. Short-dated volatility measures remained firm, and downside skew stayed in place, showing that investors were still more focused on protection than on chasing a rebound.

That matters because the rise in volatility was not simply about equity weakness. It reflected uncertainty over energy supply, inflation and central-bank reaction functions. By Monday 9 March, options markets were implying a weekly move of nearly 2.9% in the S&P 500, while downside options remained richer than upside exposure, consistent with a market still bracing for unstable headlines.

Market pulse: volatility stayed high because the market saw Iran as an ongoing macro event, not a one-day shock.

Digital assets

Crypto held up better than many risk assets, but did not decouple from macro stress.

Bitcoin and Ethereum were relatively stable through the week, with Bitcoin trading broadly between the high $67,000s and low $72,000s, while Ethereum held near the $2,000 to $2,130 range. Early in the week, ETF demand helped cushion the asset class, particularly in bitcoin exposure, but that support became less consistent as macro risk intensified.

By the end of the week, the tone had softened. Bitcoin ETF flows turned negative, while Ethereum exposure remained somewhat better supported. That left digital assets looking more resilient than some high-beta equity segments, but still sensitive to the same drivers affecting broader markets: oil, yields and risk appetite. The listed crypto ecosystem also remained under pressure as investors reduced exposure to more cyclical and momentum-driven pockets of the market.

Market pulse: crypto showed resilience, but ETF support softened rather than removed macro pressure.

Fixed income

Bond markets repriced inflation risk faster than recession risk.

US Treasury yields moved higher through much of the week as markets reassessed the inflation implications of rising oil and gas prices. The 10-year Treasury yield climbed from around 4.05% early in the week to roughly 4.14% by 6 March, while the 2-year yield moved back above 3.55%. That shift reflected a market becoming less confident that lower rates would arrive quickly if the energy shock proved persistent.

The same pattern appeared elsewhere. German Bund yields rose as Europe faced renewed imported-energy risk, UK gilt yields moved higher as inflation concerns returned, and Japan’s yield curve steepened as longer-dated government bonds came under pressure. Credit markets also reflected a more cautious tone, with high-yield spreads widening before partially retracing during the mid-week risk rebound.

Market pulse: fixed income markets treated Iran less as a growth scare and more as an inflation complication.

Commodities

Commodities were the clearest expression of the Iran shock.

Energy dominated the week’s macro narrative. Brent crude rose sharply through the week and then surged at the Monday 9 March open, briefly nearing $120 a barrel as markets confronted the scale of disruption around the Strait of Hormuz and the risk of tighter supply in crude, diesel, jet fuel and LNG. Reuters reported that oil rose roughly 25% on 9 March, its highest level since mid-2022.

Natural gas and refined products reinforced the same message. European gas prices spiked early in the week, while broader commodity markets began to price in the inflationary effects of higher energy costs. Gold’s performance was more complex. It initially softened as the dollar strengthened and deleveraging hit hard assets, but the underlying strategic case for precious metals remained intact as markets weighed the risk of a broader stagflationary backdrop.

Market pulse: commodities were not a side story; they were the mechanism through which the conflict reached global markets.

Currencies

The dollar regained its role as the cleanest liquid refuge.

Foreign-exchange moves were more orderly than those seen in equities or commodities, but the direction was still clear. The US dollar strengthened as investors sought liquidity and safety, with EURUSD falling toward 1.1530 during the week before stabilising near 1.1600. USDJPY also pushed toward the upper end of its recent range as higher energy prices and rising global yields complicated the yen’s safe-haven role.

Emerging-market currencies were more visibly pressured by weaker risk sentiment, while sterling also came under pressure as the oil shock raised questions for energy-importing economies. Reuters reported that sterling fell sharply on 9 March as the oil surge forced investors to reconsider the inflation outlook and the likely policy response.

Market pulse: in this phase of the shock, the dollar remained the market’s preferred shelter.

Key takeaways

Iran became the week’s dominant macro driver rather than just a geopolitical backdrop.
Oil, gas and shipping disruption were the key transmission channels into global markets.
Equities remained unstable, with Europe and energy-importing Asian markets hit hardest.
Options activity showed a clear preference for downside protection across broad markets.
Energy and metals positioning stayed selective and hedged rather than outright bullish.
Bond yields rose as markets repriced inflation risk more aggressively than recession risk.
Digital assets proved relatively resilient, though still sensitive to the same macro pressures.

Looking ahead (9 to 13 March 2026)

The key question now is whether the Iran shock remains an energy event or becomes a broader policy problem.

The coming week is heavy with macro and earnings catalysts, but the biggest issue is whether the oil spike proves temporary or starts to feed more deeply into inflation and rate expectations. That distinction matters because it will determine whether markets can continue to look through the conflict or whether earnings expectations and policy assumptions need to be revised lower.

The first major test is US CPI on Wednesday 11 March. That report arrives just before the next Federal Reserve meeting and will be watched closely for any sign that inflation was already proving sticky even before the latest energy surge. Later in the week, the PCE price index will offer a second important inflation checkpoint. If both releases stay firm, the market may conclude that the inflation problem is becoming broader than oil alone.

Earnings also matter. Oracle is due to report on 10 March and Adobe on 12 March, providing fresh read-through for AI spending, software demand and broader confidence in growth leadership. That matters because if core growth sectors start to wobble at the same time as oil stays elevated, the market backdrop becomes materially more fragile.

Housing, trade and consumer data will add texture, but the main checklist remains straightforward: oil, inflation, central-bank expectations and whether risk assets can continue to compartmentalise the conflict.

Market pulse: the week ahead will show whether this remains an energy shock or becomes a wider regime shift for markets.

Conclusion

The first week of March ended with a different market narrative than the one it started with.

What began as a geopolitical escalation involving Iran evolved into a broader repricing across oil, volatility, yields, currencies and equity risk. That matters because it changes how investors interpret every new headline. This is no longer only about regional instability. It is about whether the conflict injects a fresh inflation impulse into a market that was still hoping for lower rates and calmer conditions.

Markets did not respond with indiscriminate panic, but they did respond with a clear increase in hedging and a preference for selective exposure over broad conviction. That is usually what markets look like when investors still see opportunities, but trust the backdrop less with each passing day.

The video featured on this page was generated using artificial intelligence. It is provided for informational and educational purposes only and reflects an automated interpretation of the accompanying article content.

Related articles/content
- Global Markets are still only pricing for modest disruptions from Iran war (podcast) \| 9 March 2026 - When markets look chaotic emotions matter more than portfolios \| 9 March 2026 - Iran headlines market turbulence and options - a practical map of what to trade \| 4 March 2026 - Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign \| 4 March 2026 - Iran escalation The portfolio playbook \| 3 March 2026 - Investor Q&A on the Iran-US conflict \| 2 March 2026 - The Macro Take Iran conflict what to watch \| 2 March 2026 Saxo Market Compass - 2 March 2026 - Iran escalation: Quick thoughts on markets \| 1 March 2026 Saxo Market Compass - 23 February 2026 Saxo Market Compass - 16 February 2026

Related articles/content

- Global Markets are still only pricing for modest disruptions from Iran war (podcast) | 9 March 2026
- When markets look chaotic emotions matter more than portfolios | 9 March 2026
- Iran headlines market turbulence and options - a practical map of what to trade | 4 March 2026
- Oil, inflation, and a sudden “no thanks” to risky bets: Mr. market flips the sign | 4 March 2026
- Iran escalation The portfolio playbook | 3 March 2026
- Investor Q&A on the Iran-US conflict | 2 March 2026
- The Macro Take Iran conflict what to watch | 2 March 2026
Saxo Market Compass - 2 March 2026
- Iran escalation: Quick thoughts on markets | 1 March 2026
Saxo Market Compass - 23 February 2026
Saxo Market Compass - 16 February 2026

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 2 March 2026

Mon, 02 Mar 2026 16:30:00 Z

Saxo Weekly Market Compass – 2 March 2026

(Recap week of 23 to 27 February 2026)

Headlines & introduction

AI volatility, shifting rate expectations and rising geopolitical tension shaped the final week of February.

Markets oscillated between earnings-driven optimism and renewed caution as policy headlines and sector narratives kept dispersion high. By Friday, bond yields had fallen to fresh cycle lows while equity momentum cooled, setting a more fragile tone into March.
Market pulse: confidence returned mid-week, but conviction faded into the weekend.

Equities

US: AI leadership tested, but breadth improved

US equities swung sharply through the week. After an early selloff on AI disruption fears (23 February), the S&P 500 rebounded to 6,946.13 on 25 February before easing back to 6,908.86 by 26 February as Nvidia fell 5.5% despite strong results. Microsoft (+3.0% on 25 February) and Palantir (+4.2%) supported the mid-week recovery, while sharp earnings reactions in Salesforce and Block underscored rising stock dispersion.
Falling Treasury yields provided valuation support, but widening high-yield spreads suggested investors were becoming more selective.
Market pulse: leadership remains tech-heavy, but earnings volatility is increasing.

Europe and Asia: resilience in Europe, divergence in Asia

European equities pushed to fresh highs mid-week, with the Euro STOXX 50 reaching 6,172.36 on 25 February and the FTSE 100 touching a record 10,910.55 on 27 February. Buyback announcements supported select UK names, while parts of continental Europe stayed sensitive to softer sentiment data.
In Asia, Japan and South Korea outperformed on chip strength, while Hong Kong remained more volatile ahead of China’s policy meetings.
Market pulse: Europe shows resilience, but Asia remains policy- and tech-sensitive.

Volatility

Volatility cooled mid-week, then stabilised

The VIX fell from 21.01 on 23 February to 17.93 on 25 February as equities recovered. By 26 February, it stood at 18.63, signalling that hedging demand had eased but not disappeared. Weekly implied moves narrowed from roughly ±118 points early in the week to ±42 points by expiry.
Elevated skew readings indicate investors still prioritise downside protection.
Market pulse: volatility has eased from stress levels but hasn’t returned to comfort.

Market sentiment based on options flow data

Positioning shifts from expansion to protection

Last week’s options activity painted a coherent picture across asset classes: investors largely stayed invested, but with a noticeably stronger emphasis on protection and structure. Broad index and ETF flows showed a clear preference for downside hedges and volatility overlays, signalling that portfolio insurance moved higher up the priority list. Within mega-cap leadership, positioning shifted from straightforward upside participation toward more buffered exposure, suggesting that even in core growth names, risk was being actively managed rather than expanded.

At the same time, metals continued to attract constructive interest as a diversification sleeve, while energy exposure was maintained but increasingly expressed through defined-risk structures. The overall message for investors is not one of panic or capitulation, but of recalibration: capital remains deployed, yet more deliberately hedged.
Market pulse: participation remains intact, but conviction is now expressed through protection rather than leverage.

Digital assets

ETF flows stabilise despite price swings
Bitcoin traded between roughly $63,100 on 23 February and $68,176 on 25 February before easing back below $68,000 into Friday. Ethereum followed a similar pattern. US spot Bitcoin ETFs recorded net inflows of +$254 million on 26 February after earlier outflows, with IBIT leading, while Ethereum ETFs also saw modest inflows.
Institutional participation therefore appears steady, even as prices react to broader macro shifts.
Market pulse: flows are constructive, but digital assets remain tied to macro sentiment.

Fixed income

Yields fall to cycle lows

US Treasuries rallied into week-end. The 10-year yield closed at 3.94% on 27 February, marking the first weekly close below 4.00% since mid-2024, while the 2-year yield touched levels below 3.41%. High-yield spreads widened to 291 basis points by Friday, the widest of the year.
In Europe, softer inflation readings reinforced expectations that tightening cycles are nearing completion.
Market pulse: bond markets are pricing slower growth and more cautious policy expectations.

Commodities

Gold steady, oil sensitive to geopolitics

Gold traded in a tight range near 5,200 per ounce during the week before breaking higher at the start of March. Silver showed sharper swings, briefly clearing 91 before consolidating.
Crude oil remained sensitive to developments around Iran and the Strait of Hormuz, trading near multi-month highs late in the week. Energy markets are now the clearest barometer of geopolitical risk.
Market pulse: commodities are increasingly driven by geopolitics rather than demand alone.

Currencies

Dollar mixed, sterling pressured by politics

The US dollar fluctuated around 1.1800 in EURUSD through most of the week, while USDJPY reversed sharply on shifting Bank of Japan signals. Sterling weakened after a UK by-election unsettled political expectations, with EURGBP moving above 0.8750.
Commodity-linked currencies stayed sensitive to oil’s move.
Market pulse: FX markets are balancing rate differentials against political risk.

Key takeaways

AI leadership intact, but earnings volatility rising.
European indices resilient; Asia more policy-sensitive.
US 10-year yield closed below 4.00% for first time since mid-2024.
Volatility cooled, but skew remains elevated.
Bitcoin ETF inflows resumed despite price swings.
Oil risk premium building amid Iran tensions.

Looking ahead (week of 2 to 6 March 2026)

Geopolitics takes centre stage

The US-Israeli strikes on Iran over the weekend materially raise geopolitical risk. Markets will focus on three transmission channels: oil supply and shipping through the Strait of Hormuz, insurance and freight costs, and second-round inflation expectations. If higher energy prices persist, they could complicate the recent decline in bond yields and alter expectations for central bank policy paths.

For deeper analysis on the conflict and its market implications, readers can consult our dedicated coverage published this weekend and Monday:

the equities note on the Iran conflict (1 March),
the macro take on what to watch (2 March),
the investor Q&A on the Iran-US escalation (2 March), and
the latest Saxo Market Call podcast (2 March).

These pieces explore cross-asset implications in greater detail.

US labour market in focus

Friday’s US employment report for February is the key macro catalyst. January showed job growth of 130,000, with earlier months revised lower. Markets will assess whether hiring momentum is stabilising or slowing further. ADP employment data mid-week, ISM surveys and the Federal Reserve’s Beige Book will provide additional context on growth and pricing pressures.

If payrolls surprise on either side, rate expectations and equity volatility could reprice quickly.

Earnings and consumer signals

After Nvidia’s volatile reaction, semiconductor earnings remain central. Broadcom and Marvell will be watched for AI demand commentary, while CrowdStrike provides a read on software resilience. Retail earnings from Target, Costco and Best Buy should offer insight into consumer demand trends as markets await updated retail sales data.

Market pulse: geopolitics sets the tone, but labour data and earnings will determine whether caution deepens or stabilises.

Conclusion

The final week of February highlighted a market still anchored by technology leadership but increasingly sensitive to macro and geopolitical crosscurrents. Falling bond yields and resilient European equities provide some stability, yet widening credit spreads and elevated skew signal cautious positioning beneath the surface.

As March begins, the combination of Middle East escalation, US labour data and heavyweight earnings could quickly reshape risk appetite. Staying diversified and attentive to cross-asset signals remains essential.

Related articles/content
Saxo Market Compass - 23 February 2026 Saxo Market Compass - 16 February 2026 Saxo Market Compass - 9 February 2026 Saxo Market Compass - 2 February 2026 Saxo Market Compass - 26 January 2026 - recap and insight Saxo Market Compass - 26 January 2026 Saxo Market Compass - 19 January 2026 Saxo Market Compass - 12 January 2026 The Saxo Weekly Market Compass - 15 December 2025

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Investor Q&A on the Iran-US conflict

Mon, 02 Mar 2026 10:30:00 Z

Key takeaways

This is an oil-and-shipping shock first, and a growth-and-earnings story second.
Higher oil can lift inflation and delay rate cuts, making bonds a less perfect hedge.
Long-term investors win by sticking to process, not by trying to trade the headline.

The weekend escalation involving the United States (US), Israel and Iran pulls markets back into “risk-off” mode. Risk-off means investors reduce exposure to shares and other risky assets, and lean into perceived safe havens.

Below is a Q&A built for long-term investors, focused on what matters most and what to watch.

The first domino is not oil, it is the cost of moving oil

Q: What just happened?
Reports point to a sharp military escalation and a jump in maritime risk around the Gulf, with tanker operations disrupted near the Strait of Hormuz. Even limited disruption matters because the strait is a narrow passage that carries a large share of global seaborne energy.

Q: Why do investors keep talking about the Strait of Hormuz?
Because it is a choke point. When a choke point gets risky, markets price two things at once: the barrel, and the delivery. Delivery costs include insurance, rerouting, delays, and “war-risk premia” which is the extra cost to operate in a war zone. Shipping stocks can pop if investors expect freight rates and war-risk surcharges to rise, even though disruption also raises costs and uncertainty.

The move is basically the market saying “rates and surcharges may rise faster than costs, at least at first”. When shipping lanes get risky, carriers often add war-risk and disruption surcharges, and global freight rates can tighten if capacity gets rerouted. That can be positive for large operators even though the situation is operationally messy.

Q: What does “sticky oil” change for a long-term investor?
It changes the inflation path more than it changes long-term demand. Higher energy costs behave like a tax on consumers and many businesses. Over time, that can squeeze profit margins, cool spending, and pressure earnings expectations, especially in energy-intensive sectors.

The second domino is inflation, and that is where the central bank headache begins

Q: Does higher oil automatically mean higher interest rates?
Not automatically. But it can slow the improvement in inflation and make central banks more cautious about cutting rates quickly. The risk is not just higher petrol bills today. The risk is higher inflation expectations tomorrow.

Q: Are government bonds still a safe haven in this kind of shock?
Sometimes, but less reliably than in a pure growth scare. If markets treat this mainly as an inflation shock, bond yields can rise even while shares fall, which weakens the classic “shares down, bonds up” cushion. That is why some investors diversify their hedges across several assets rather than expecting one instrument to do all the work.

A small example from the prior session: the iShares 20+ Year Treasury Bond ETF, ticker TLT, closed at 90.82 USD, up 0.4%. That is supportive, but it is not a guarantee of protection if inflation fears dominate.

The third domino is leadership rotation, not a permanent change in the rules

Q: Which areas tend to feel the pain first?
Usually the ones hit by a double whammy of higher fuel and weaker demand. Airlines and travel-linked businesses can face both, plus route disruption. Trade-exposed cyclicals especially industrials, consumer discretionary importers, and global manufacturers, often get hit early as delays and higher freight/insurance costs squeeze margins and disrupt supply chains.

Q: Who tends to look steadier, and why?
Energy-linked exposures can benefit from higher oil prices, but they also carry their own headline risk. Defence and security spending can reprice higher as governments focus on protection and resilience, although individual days can still be volatile.

In the prior close, the iShares US Aerospace & Defense ETF, ticker ITA, closed at 243.72 USD, down 1.0%. That looks counter-intuitive until you remember the market often sells broadly first, then differentiates later.

Q: What about gold, the dollar, and “safe-haven currencies”?
Gold often acts like portfolio insurance because it is less tied to any single country’s earnings outlook. The prior close fits that pattern, with GLD up 2.7%. Safe-haven currencies such as the Japanese yen and Swiss franc often strengthen in risk-off episodes too. As simple proxies, the Japanese yen trust ETF, ticker FXY, closed at 58.83 USD, up 0.2%, and the Swiss franc trust ETF, ticker FXF, closed at 114.88 USD, up 0.1%.

Risks to watch while the headlines churn

The main risk is escalation that keeps shipping constrained for longer than markets expect. Watch for signs like prolonged tanker queues, wider insurance surcharges, and more rerouting. The second risk is macro. If oil stays elevated, inflation can linger, and rate cuts can become harder to deliver. The third risk is policy surprise, including sanctions, export controls, or emergency measures that alter energy flows and supply chains quickly.

Investor playbook

Treat the first 24 to 72 hours as price discovery, not a verdict on the next five years.
Stress-test your portfolio for higher oil and higher inflation, not just lower growth.
Prefer diversification across regions and sectors over concentrated “war trades”.
Set simple triggers to review risk, such as oil staying elevated for weeks, not days, and inflation expectations rising.

Back to basics, with a side of turbulence

In the end, markets usually return to cash flows and fundamentals. But the path matters. This episode is a reminder that geopolitics can raise the cost of doing business, even when demand stays intact.

For long-term investors, the goal is not to predict the next headline. It is to build a portfolio that can handle several outcomes without forcing you to sell at the worst moment. In other words, keep your process boring. The news will do its best to be exciting for you.

Ruben Dalfovo

Investment Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF Stocks

Saxo Market Compass - 23 February 2026

Tue, 24 Feb 2026 06:02:00 Z

Saxo Weekly Market Compass – 23 February 2026

(Recap week of 16 to 20 February 2026)

Headlines & introduction

Rates, geopolitics and trade policy shaped cross-asset direction.

Global markets navigated a week defined by hawkish Federal Reserve minutes, resilient but slowing US growth data, renewed Middle East tensions and late-week US tariff headlines. Equities remained broadly resilient despite higher yields, while volatility stayed elevated but orderly. Commodities responded quickly to geopolitical developments, and digital assets tracked macro liquidity conditions rather than internal crypto narratives.

It was a week where policy tone mattered more than positioning, and markets adjusted accordingly.

Equities

US: resilience despite higher yields and policy crosscurrents.

US equities traded in wide intraday ranges but held firm overall. The S&P 500 rose 0.6% on 18 February and added 0.7% on 20 February, even as Fed minutes (19 February) signalled caution on rate cuts and Q4 GDP printed at 1.4% (20 February). Nvidia and Amazon advanced on 18 February, reflecting continued AI-related demand, while Deere surged 11.7% on 20 February after raising guidance. Walmart slipped 1.4% the same day after issuing a cautious outlook.

Europe and Asia: local strength, selective earnings pressure and softer Hong Kong tech.

In the UK, the FTSE 100 reached a record 10,556 on 18 February, supported by banks and defence shares including BAE Systems. On the continent, the STOXX 50 rose 1.2% and the STOXX 600 gained 0.8% on 20 February as luxury and industrial names led. France’s LVMH rose 4.4% and Hermès 3.6%, while Airbus fell 6.8% after trimming production targets. In Italy, Enel declined 3.6% following tax changes. Hong Kong’s Hang Seng ended down 1.1% on 20 February as technology stocks cooled ahead of Nvidia’s results.

Market pulse: equity markets rotated across sectors rather than retreating from risk.

Volatility

Elevated, but controlled.

The VIX hovered around 20 throughout the week, easing to 19.62 on 18 February before firming again into the PCE release on 20 February. Short-term volatility gauges cooled mid-week, then re-tightened as inflation and tariff headlines approached.

Options pricing implied weekly S&P 500 moves in a ±1–2% range into expiry, consistent with event hedging rather than systemic stress. Skew remained supported for much of the week, indicating persistent demand for downside protection.

Market pulse: investors are hedging events, not pricing crisis.

Market sentiment based on options flow data

Prudence without capitulation.

Across equities and metals, last week’s options activity pointed to disciplined risk management. In broad indices and mega-cap technology, confirmed opening flow leaned heavily toward near-term downside protection, signalling that institutional participants were unwilling to remain unhedged. At the same time, selective longer-dated upside positioning and structured call activity suggest exposure was being recalibrated rather than cut.

In gold and silver, upside participation was visible, but accompanied by hedges in mining equities and targeted downside structures. The aggregate message was not panic, but caution: investors appear to be staying invested while actively pricing in volatility in an environment where macro and headline risks remain elevated.

Market pulse: positioning reflects recalibration, not retreat.

Digital assets

Liquidity-driven consolidation.

Bitcoin traded largely between USD 67,000 and 69,000 during the week before slipping toward USD 65,700 on 23 February as tariff uncertainty resurfaced. Ethereum held near USD 2,000 before easing toward USD 1,880.

ETF flows showed divergence rather than broad withdrawal, suggesting reallocation within the space. Crypto-linked equities broadly tracked US risk sentiment, reinforcing the view that digital assets remain closely tethered to macro conditions and US rate expectations.

Market pulse: crypto continues to behave as a high-beta liquidity proxy.

Fixed income

Yields test and rebound around key levels.

The US 10-year Treasury yield approached the 4.00% threshold early in the week before rebounding toward 4.10% after hawkish Fed minutes and a weak 20-year auction on 19 February. Two-year yields backed up toward 4.47%, keeping “higher for longer” expectations in play.

In Japan, strong demand at a five-year JGB auction (17 February) pushed yields lower, while January CPI slowed to 1.5% (20 February), reinforcing a measured Bank of Japan path.

Market pulse: bond markets remain the primary transmission channel for macro shifts.

Commodities

Energy and precious metals reflect geopolitical risk.

Brent crude rose toward USD 70–71 during the week as US–Iran tensions intensified, before easing modestly. Gold traded within a USD 4,860–5,140 range and briefly moved above USD 5,100 late in the week as tariff uncertainty revived defensive demand. Silver rebounded after mid-week weakness, while copper softened amid rising inventories and seasonal disruptions linked to Lunar New Year.

Market pulse: geopolitical headlines are supporting defensive commodities, while growth-sensitive signals stay mixed.

Currencies

Dollar swings with rates and trade.

The US dollar strengthened mid-week following hawkish Fed minutes, with EURUSD dipping below 1.1800 and GBPUSD breaking under 1.3500 between 19 and 20 February. The tone shifted again on 23 February as renewed tariff headlines weighed on the dollar.

USDJPY traded in a 153–155 range as yield spreads fluctuated, while the Australian dollar outperformed following strong labour data on 19 February.

Market pulse: foreign exchange remains rate-led, with trade policy adding tactical volatility.

Key takeaways

US equities showed resilience despite hawkish Fed minutes and softer GDP.
European markets were supported by defence and luxury strength.
Volatility remained elevated but contained near 20.
US yields retested the 4% zone before rebounding.
Oil and gold reflected geopolitical risk rather than demand optimism.
Digital assets consolidated in line with macro liquidity conditions.

Looking ahead (23 to 28 February 2026)

Earnings in focus: AI, housing and corporate spending.

Nvidia reports on 25 February, a key test for the AI capital expenditure narrative and broader technology valuations. Home Depot reports on 24 February, with housing demand, pricing power and inventory commentary likely to be closely watched. Canadian banks and Dell later in the week extend the read-through to credit conditions and enterprise IT spending, while Berkshire Hathaway’s results on Saturday offer a broader barometer of conglomerate-level economic exposure.

Policy and macro catalysts.

President Trump delivers the State of the Union on 24 February, with trade policy and fiscal framing likely to influence market tone following recent tariff-related legal developments. Federal Reserve speakers, including Governor Waller, remain on the calendar, keeping rate expectations in focus ahead of March policy discussions.

On the data front, the Case-Shiller home price index, weekly jobless claims and January PPI are key releases. A surprise in producer inflation could quickly feed through to front-end yields and the US dollar, with knock-on effects for growth equities and digital assets.

For long-term investors, the emphasis remains on earnings durability in a higher-rate environment.
For active investors, event sequencing around earnings and macro data may create tactical volatility windows across sectors.

Market pulse: rates and forward guidance will likely determine whether resilience extends or risk is repriced.

Conclusion

The week of 16 to 20 February highlighted a market balancing firm macro data, cautious central bank messaging and renewed trade policy uncertainty. Equities absorbed crosscurrents through sector rotation, bonds reasserted their influence over valuations, and volatility remained elevated but orderly.

With major earnings and political communication ahead, positioning appears tactical rather than complacent. Diversification and disciplined risk management remain essential as markets navigate policy-driven crosscurrents.

Related articles/content
Saxo Market Compass - 16 February 2026 Saxo Market Compass - 9 February 2026 Saxo Market Compass - 2 February 2026 Saxo Market Compass - 26 January 2026 - recap and insight Saxo Market Compass - 26 January 2026 Saxo Market Compass - 19 January 2026 Saxo Market Compass - 12 January 2026 The Saxo Weekly Market Compass - 15 December 2025

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 16 February 2026

Mon, 16 Feb 2026 14:30:00 Z

Saxo Weekly Market Compass – 16 February 2026

(Recap week of 9 to 13 February 2026)

Headlines & introduction

Global markets navigated a week of shifting narratives, as AI optimism, earnings dispersion and softer US inflation pulled sentiment in different directions.

Early gains in US and European equities gave way to profit-taking and renewed technology-sector caution, while bond yields reset lower after a cooler CPI print. Volatility rose but remained orderly, and digital assets consolidated as ETF flows turned selective rather than one-sided.

Equities

US: data sensitivity and earnings dispersion dominate.

US indices opened firmer, with the S&P 500 at 6,964 on 9 February and the Nasdaq 100 up 0.8% (10 February) as AI-linked shares rebounded. However, flat retail sales (11 February) and mixed earnings guidance prompted selective risk reduction. A stronger-than-expected 130k payroll print (12 February) briefly lifted yields, before CPI reintroduced caution. By 13 February, the Dow had fallen 1.3%, the S&P 500 1.6% and the Nasdaq 2.0%.

Single-name dispersion was pronounced. Oracle rose 9.6% (9 February) and Spotify 14.8% (10 February), while Cisco fell 12.3% and AppLovin 19.7% (13 February). Softer CPI at 2.4% year-on-year (reported 16 February) steadied sentiment into the close.

Market pulse: US equities remain highly reactive to inflation and earnings guidance, with leadership rotating quickly.

Europe and Asia: records fade as stock selection drives returns.

European equities followed Wall Street higher early in the week, with the STOXX 600 touching 621.58 (11 February) before easing to 618.52 (13 February). Earnings divergence drove performance: Siemens Energy gained 8.4% (12 February) and Ahold Delhaize 11.5%, while Adyen fell 21.9% and DSV declined 10.5% (13 February). UK Q4 GDP rose just 0.1% (13 February), reinforcing a modest domestic growth backdrop.

In Asia, Japan’s Nikkei jumped 3.9% to 56,363 (9 February) before moderating later in the week. Hong Kong traded mixed into Lunar New Year closures, while mainland indices were steadier on policy support signals.

Market pulse: outside the US, performance reflects earnings dispersion and macro cross-currents rather than broad trend momentum.

Volatility

Elevated, but structured.

The VIX rose from 17.36 (9 February) to 20.82 (12 February) as CPI and payroll risks approached, closing at 20.60 into the US holiday (13 February data). Short-dated measures such as VIX1D moved above 21, indicating tactical hedging demand, while SKEW near 142–143 showed ongoing appetite for downside protection.

Options pricing implied weekly S&P 500 moves of roughly ±65 to ±82 points mid-week, expanding toward ±128 points into the next expiry. That reflects event risk rather than disorderly positioning.

Market pulse: investors are hedged, but volatility remains contained within defined ranges.

Market sentiment based on options flow data

Constructive engagement, framed by protection.

Options flow across indices and large-cap technology indicated continued participation in risk assets, accompanied by deliberate downside protection. Index-level hedging demand remained steady, while positioning in mega-cap technology combined selective upside exposure with near-term insurance.

In metals, particularly gold, flows were two-sided, blending upside participation with structured protection. The overall picture does not signal panic or wholesale de-risking. Instead, it reflects disciplined exposure management in an environment where macro catalysts and sector dispersion remain active drivers.

Market pulse: capital remains deployed, but increasingly through risk-defined structures rather than open-ended directional bets.

Digital assets

Consolidation amid selective ETF flows.

Bitcoin traded largely between the mid- and high-$60,000s during the week, while Ethereum hovered near $1,950–2,040. ETF flows were mixed: IBIT recorded both inflows (+$26.5m on 10 February) and later outflows, while ETHA saw net redemptions mid-week.

Crypto-linked equities experienced sharper swings, with Coinbase down 7.9% (13 February) before stabilising. The pattern suggests tactical repositioning rather than capitulation, with macro data and rate expectations guiding sentiment.

Market pulse: digital assets are consolidating, awaiting clearer macro direction to re-establish trend conviction.

Fixed income

Disinflation supports a yield reset lower.

Treasuries rallied into week’s end. The 10-year yield fell toward 4.05% (13 February), while the 2-year closed below 3.41%, its lowest since 2022. Earlier in the week, payroll strength had lifted the 10-year above 4.20%, underscoring rate sensitivity to data surprises.

In Europe, the German 2-year yield held near 2.07%, reflecting restrained expectations for rapid ECB easing. Japanese long-dated bonds saw strong demand mid-week before a modest curve steepening following softer Q4 GDP.

Market pulse: bond markets are cautiously leaning toward a slower easing path, conditional on sustained inflation moderation.

Commodities

Energy weakens, gold supported, agriculture diverges.

Brent crude slipped below USD 68 by week’s end after failing to sustain moves above USD 70, as inventory builds and ebbing geopolitical risk weighed. Gold remained supported near USD 5,000, benefitting from softer yields late in the week.

Sugar fell to 13.5 cents/lb amid improved supply prospects and weaker consumption trends, while wheat climbed to a three-month high on crop concerns and short covering. Commodity performance reflected positioning shifts rather than structural demand changes.

Market pulse: commodities are trading tactically, driven by macro sensitivity and flow dynamics.

Currencies

Yield differentials continue to anchor FX moves.

The yen strengthened early in the week, with USDJPY falling toward 152.27 (12 February), before rebounding above 153 as the dollar stabilised. EURUSD traded around 1.19, reflecting shifting US rate expectations.

Sterling was volatile following weaker UK GDP, while AUDUSD briefly tested 0.7150 before retreating. FX movements largely tracked bond market repricing rather than independent risk themes.

Market pulse: currency markets remain yield-led, with the yen a key volatility driver.

Key takeaways

US equities volatile as AI narrative shifts and CPI cools to 2.4%.
VIX elevated near 20, but positioning remains orderly.
US 2-year yield below 3.41%, lowest since 2022.
Bitcoin consolidates; ETF flows selective rather than capitulative.
Brent below USD 68; gold supported by softer yields.
Yen swings mirror rate repricing dynamics.

Looking ahead (16–20 February 2026)

A shortened week concentrates risk.
US markets are closed on Monday 16 February for Presidents’ Day, compressing liquidity into four trading sessions. Holiday-thinned conditions often amplify intraday moves when trading resumes.

Policy insight and inflation in focus.
The Federal Reserve releases minutes from its late-January meeting on Wednesday 18 February, offering insight into internal debate around inflation progress and the timing of potential rate cuts. On Friday 20 February, the Bureau of Economic Analysis publishes Personal Income and Outlays for December, including the PCE price index — the Fed’s preferred inflation gauge. Confirmation of moderating price pressures would reinforce last week’s yield decline; a surprise could quickly reprice the front end.

Earnings dispersion continues.
Walmart reports on Thursday, providing an important read on US consumer resilience and pricing power. Deere offers insight into agricultural and industrial demand. Analog Devices and Palo Alto Networks will test the durability of AI hardware and cybersecurity spending, while Airbus and Rio Tinto add a European industrial lens.

For active investors, event-driven volatility is likely to persist. For long-term investors, the trajectory of inflation and bond yields remains the primary anchor.

Market pulse: a compressed week with clustered catalysts raises the probability of sharper cross-asset reactions.

Conclusion

Last week demonstrated how quickly sentiment can pivot between growth optimism and disruption concerns. Softer inflation has steadied bond markets and offered tentative support to equities, yet volatility remains elevated as investors assess the durability of disinflation and earnings momentum. With PCE data and FOMC minutes ahead in a shortened week, markets are likely to remain reactive, range-bound and sensitive to policy nuance rather than headline optimism.

Related articles/content
Saxo Market Compass - 9 February 2026 Saxo Market Compass - 2 February 2026 Saxo Market Compass - 26 January 2026 - recap and insight Saxo Market Compass - 26 January 2026 Saxo Market Compass - 19 January 2026 Saxo Market Compass - 12 January 2026 The Saxo Weekly Market Compass - 15 December 2025

More from the author
Koen Hoorelbeke's articles on Saxo Follow and interact with me on X (Twitter) for more intraday content

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 9 February 2026

Mon, 09 Feb 2026 12:00:00 Z

Saxo weekly market compass – 9 February 2026

Recap week of 2 to 6 February 2026

Headlines & introduction

February opened with sharp cross-asset swings before markets found a tentative footing into the end of the week. Equity sentiment oscillated between AI-driven sell-offs and forceful rebounds, volatility stayed elevated but orderly, and commodities experienced extreme, liquidity-led moves. At the same time, currencies and rates reflected a reassessment of central bank timing rather than a clear macro break.
Market pulse: investors are recalibrating risk, not abandoning it.

Equities – US: rotation, not capitulation

Earnings discipline returns as the key market filter.
US equities endured a volatile but ultimately stabilising week. Technology weakness early on, driven by concerns around AI monetisation and capital expenditure, gave way to a sharp rebound into Friday (3–6 February). Semiconductor stocks were central to both moves, selling off on cautious guidance before rebounding strongly as dip buyers returned. The Dow’s relative strength highlighted ongoing rotation rather than broad de-risking.

Away from chips, earnings dispersion remained pronounced. Amazon slipped after flagging a step-up in infrastructure spending, keeping margin discipline in focus, while healthcare outperformed as resilient earnings from large pharmaceutical names supported defensives (5 February).
Market pulse: US equities are rotating internally, with selectivity replacing blanket risk appetite.

Equities – Europe and Asia: local stories take the lead

Policy patience meets stock-level reality.
European markets were broadly rangebound, but index stability masked sharp stock-level moves. Germany and the Netherlands saw selective rebounds in industrials and technology, while healthcare sentiment remained sensitive after weaker medium-term guidance from Novo Nordisk earlier in the week (4–5 February). In the UK, equities faced a mixed backdrop as sterling weakness following a dovish Bank of England decision weighed on domestic names, even as exporters found support (6 February).

Asia outperformed on balance. Japan extended record gains following a decisive election outcome that reinforced expectations for fiscal support and pro-growth policy, lifting domestically focused stocks (6–9 February). China and Hong Kong remained more cautious, with tech shares sensitive to global risk swings despite improving services data.
Market pulse: outside the US, equity performance is increasingly shaped by local policy and earnings narratives.

Volatility – elevated, but controlled

Event risk keeps protection in demand.
Volatility remained a defining feature of the week, but without signs of disorder. The VIX fluctuated between the mid-teens and low 20s, peaking mid-week as technology stocks sold off before easing back as equities stabilised (6–9 February). Short-dated volatility stayed firm, signalling persistent demand for near-term protection rather than fear of a systemic drawdown.

Options markets consistently priced meaningful expected moves around key data and earnings, reinforcing a backdrop where timing risk matters. Volatility compressed into the end of the week, but did not fully unwind.
Market pulse: volatility is being managed, not ignored.

Market sentiment based on options flow data

Positioning favours resilience over conviction.
Last week’s options activity suggests investors are staying invested but becoming more deliberate about risk. Rather than stepping away from markets, positioning points to a preference for maintaining exposure while actively preparing for larger and more frequent price swings. This shows up in the increased use of protection and hedging alongside continued upside participation, a mix that typically appears when long-term confidence remains intact but near-term uncertainty is rising.

Across asset classes, this behaviour implies a market where direction matters less than resilience. Investors appear to be planning for uneven performance, sharp rotations, and headline-driven moves rather than a smooth, trend-led advance. The signal from options markets is not panic, but prudence: opportunities remain, yet the cost of being wrong is being taken more seriously.
Market pulse: investors are engaged, but risk management has become central to participation.

Digital assets – stabilisation without conviction

Crypto follows macro risk, not its own cycle.
Digital assets spent the week attempting to stabilise after sharp drawdowns. Bitcoin held a wide range between the mid-$60,000s and low-$70,000s, while Ethereum hovered near the $2,000 area, moving largely in step with equity volatility (4–6 February). Price action continues to reflect macro risk sentiment rather than crypto-specific drivers.

ETF flows reinforced the cautious tone. Spot bitcoin ETFs saw notable outflows mid-week before partial stabilisation, while Ethereum-linked products experienced selective selling rather than wholesale exits. Crypto-linked equities and miners remained more volatile than spot prices, highlighting ongoing deleveraging.
Market pulse: crypto is steadier, but confidence remains conditional on calmer equity markets.

Fixed income – labour data revives the hedge

Rates react sharply, then consolidate.
US Treasury yields fell sharply late in the week as weaker job openings, rising claims, and softer risk sentiment shifted focus back to growth risks (6 February). The 2-year yield briefly dipped below 3.45%, while the 10-year tested the 4.15% area before rebounding as equities stabilised. Credit spreads widened modestly, consistent with caution rather than stress.

In Europe, yields were steadier as the ECB reiterated a data-dependent stance. In Japan, government bond yields pushed higher earlier in the week on fiscal concerns before finding resistance.
Market pulse: bonds are regaining relevance as a portfolio stabiliser.

Commodities – leverage flush dominates price action

Liquidity, not fundamentals, drives extremes.
Commodities delivered the most dramatic moves of the week. Precious metals whipsawed violently after a historic sell-off, with gold recovering above USD 5,000 while silver remained vulnerable to liquidity gaps and forced de-risking (3–6 February). Positioning data showed aggressive reductions in speculative longs, amplifying price swings.

Oil prices eased as US–Iran talks reduced immediate supply risk, while natural gas remained exceptionally volatile after record storage withdrawals and weather-driven reversals.
Market pulse: commodity markets are clearing excess leverage, but stability remains elusive.

Currencies – central bank signals set the tone

Policy divergence, not growth, drives FX.
Currency markets reflected shifting rate expectations. Sterling weakened sharply after a dovish Bank of England hold brought forward expectations for rate cuts (6 February). The yen strengthened later in the week following Japan’s election and renewed official vigilance, while the US dollar traded unevenly as yields swung with risk sentiment.

Commodity-linked currencies were volatile, with the Australian dollar initially supported by an RBA hike before giving back gains as global risk appetite softened.
Market pulse: FX remains a clean expression of relative policy outlooks.

Key takeaways

Equity markets rotated sharply, led by technology volatility and earnings dispersion.
Volatility stayed elevated but orderly, with active use of short-dated protection.
Options flows point to engagement with tighter risk control.
Bonds reacted strongly to labour data, restoring their defensive role.
Commodities saw extreme, liquidity-driven price action.

Looking ahead – data and earnings converge

Macro releases and results may reset expectations.
The coming week brings a dense and potentially market-defining calendar. The delayed US January employment report is due mid-week, followed by the January CPI inflation print on Friday. Together, these releases will be critical for shaping expectations around the Federal Reserve’s next policy move, particularly after recent signals of cooling labour demand. Investors will look closely at wage growth, participation rates, and core inflation momentum to assess whether disinflation is progressing quickly enough to reopen the door to rate cuts later in the year.

US retail sales data will provide an additional lens on consumer resilience following the holiday period, helping investors gauge whether softer labour indicators are feeding through to spending. Alongside the data, a heavy slate of central bank speakers could influence rates and currency markets if guidance shifts.

Earnings remain an equally important catalyst. Technology investors will focus on Cisco for insight into enterprise and AI infrastructure demand, while consumer names such as Coca-Cola and McDonald’s will test defensive growth narratives and pricing power. Results from autos, pharmaceuticals, travel and digital platforms, including Ford, Moderna, Airbnb and Shopify, add further scope for sector rotation. Crypto-linked equities remain sensitive to both macro data and digital asset flows, keeping cross-asset correlations high.
Market pulse: with jobs, inflation and earnings clustered together, this week could crystallise the market’s next macro narrative.

Conclusion

Markets ended the week on firmer ground, but confidence remains conditional. Investors are staying engaged while demanding clearer earnings delivery, calmer macro signals, and improved liquidity conditions. With labour data, inflation, and a heavy earnings slate ahead, the balance between stabilisation and renewed volatility will be tested quickly. Staying diversified and flexible remains essential as February unfolds.

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 2 February 2026

Mon, 02 Feb 2026 14:00:00 Z

Saxo weekly market compass – 2 February 2026

Recap week of 26 to 30 January 2026

Headlines & introduction

January ended with equities still resilient, but cross-asset stress shifted decisively into commodities.
Markets opened the week supported by earnings and steady growth signals, then turned more cautious as policy uncertainty and a violent reversal in precious metals tightened risk discipline. Equity indices held near record levels, but leadership narrowed and dispersion increased. The defining late-week development was the metals rout and the risk of spillovers into funding conditions and broader risk appetite.
Market pulse: risk stayed on, but conviction required protection.

Equities

US equities hovered near records as earnings optimism met rate sensitivity.
US indices oscillated around fresh highs, with the S&P 500 briefly trading above the 7,000 mark before easing into month-end. Early-week support came from AI-linked names and select mega-cap results, but tone shifted after the Federal Reserve held rates steady and attention turned to policy continuity and leadership risk. Rising yields and a firmer dollar weighed on long-duration growth late in the week, leaving the Nasdaq more exposed than the Dow as investors prioritised balance-sheet strength and earnings quality.
Market pulse: US markets stayed firm, but leadership narrowed and valuation discipline returned.

Europe and Asia saw sharper rotations as growth data met earnings reality.
European equities ended January supported by improving activity signals, with euro area GDP expanding 0.3% quarter-on-quarter in Q4, easing recession concerns and underpinning banks and cyclicals across core markets. Stock-specific earnings dominated performance. Luxury names sold off on cautious guidance, while technology diverged sharply after SAP’s cloud outlook disappointed. UK equities were steadier, helped by defensives and energy, while Nordic markets saw pronounced single-stock volatility. In Asia, Japan underperformed as yen strength weighed on exporters, while Hong Kong extended its January rally before a sharp pullback at week’s end as global risk sentiment cooled.
Market pulse: macro improved at the margin, but earnings and global risk set direction.

Volatility

Surface calm masked pockets of rising stress.
Equity volatility remained contained for most of the week, with headline measures anchored in the mid-teens. Short-dated volatility reacted to the Fed decision and major earnings rather than signalling systemic fear. Late in the week, stress migrated into commodities, where forced unwinds amplified price swings. That shift unsettled broader sentiment despite stable equity volatility readings.
Market pulse: volatility stayed low, but the stress point moved elsewhere.

Market sentiment based on options flow data

Positioning stayed constructive, but risk discipline clearly tightened.
Options activity suggests investors remained engaged while becoming more selective in how exposure was expressed. Broad index positioning indicates a willingness to stay invested, but this exposure is increasingly paired with protection, highlighting the elevated priority of risk management. Among large US technology stocks, flows favoured balanced structures that combine participation with defined outcomes, including income generation and capped upside. Overall, the options market points to confidence in market resilience, alongside a clear acknowledgement that near-term event risk warrants caution rather than unhedged optimism.
Market pulse: engaged participation, disciplined risk control.

Digital assets

Crypto tracked macro liquidity rather than crypto-specific news.
Digital assets softened into month-end, moving in line with broader risk sentiment. Price action suggested gradual deleveraging rather than panic, as a firmer dollar and sensitivity to real yields weighed on demand. ETF flows reinforced the cautious tone, with selective resilience earlier in the week giving way to broader outflows as policy uncertainty rose.
Market pulse: crypto stayed defensive, awaiting clearer macro signals.

Fixed income

Bonds quietly regained defensive appeal.
Rates traded in a relatively narrow range, but directionally investors leaned toward safety as commodities collapsed. US Treasuries attracted demand as leverage was reduced across other asset classes, while longer-dated yields eased back toward key technical levels. In Japan, government bond yields stabilised after softer inflation data and reduced near-term tightening pressure.
Market pulse: fixed income resumed its stabilising role.

Commodities

Metals broke first as leverage and margin dynamics flipped a record rally into a rout.
The week’s defining move was the collapse in precious metals following an extraordinary run. Gold and silver fell sharply after reaching record highs, with silver’s drawdown particularly severe as crowded positioning unwound. Exchange margin increases amplified the move, forcing deleveraging into thin liquidity. The impact quickly spread to listed miners and commodity-linked equities, while a firmer dollar added pressure across non-yielding assets. Energy and industrial metals also retreated, reinforcing the sense of a broad-based tightening in risk conditions rather than a single-market correction.
Market pulse: metals shifted from momentum to forced de-risking, and the aftershocks still matter.

Currencies

The US dollar found a floor after extreme weakness.
FX markets pivoted as the commodity shock and policy uncertainty drove renewed demand for the dollar. The euro held relatively firm on improving growth data, while the yen remained volatile. Commodity-linked currencies reversed earlier gains in line with falling metals and energy prices.
Market pulse: currencies moved from trend to consolidation as stress rose.

Key takeaways

Equities remained resilient, but leadership narrowed and dispersion increased.
Volatility stayed low in equities, with stress migrating into commodities.
Options markets signalled engagement paired with tighter risk control.
Bonds regained defensive appeal late in the week.
Precious metals experienced a historically violent reversal.
The US dollar stabilised after sharp early-week weakness.

Looking ahead (week of 2 to 6 February 2026)

Markets test whether the metals shock stabilises or spills further across assets.
The immediate focus is on whether gold and silver can find a base after margin-driven deleveraging, or whether further selling pressures miners, commodity-linked credit and broader risk sentiment. If metals volatility persists, investors will watch for knock-on effects via a firmer dollar, tighter financial conditions and rising cross-asset correlations.

Macro data then becomes the referee. The US calendar is dense, with ISM manufacturing, job openings and ADP employment early in the week, culminating in Friday’s January employment report. Labour-market surprises will be critical for rate expectations following the Fed’s recent hold.

Earnings remain central to index leadership. Results from Alphabet, Amazon, AMD, Disney and Palantir will shape views on AI investment, cloud demand and margins. In the current environment, markets are likely to reward visibility and balance-sheet strength over headline beats, especially if cross-asset volatility remains elevated.

Market pulse: containment first in metals, then in rates expectations.

Conclusion

January closed with equities near record levels, but the week’s message came from commodities rather than stocks. Leverage can unwind faster than narratives, and the metals rout has tightened risk discipline across markets. If stability returns quickly, risk assets may regain momentum. If not, spillovers into currencies, credit and volatility could keep investors cautious as February begins.

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Saxo Market Compass - 26 January 2026 - recap & insight (video)

Tue, 27 Jan 2026 07:47:00 Z

This video summarises the key developments from the week of 19 to 23 January 2026, including shifts in equities, volatility, currencies and commodities. It highlights how policy signals, options positioning and headline risk shaped market moves, and what themes could drive markets in the week ahead.

For the full written analysis with data and detailed commentary, read the Weekly Market Compass article via the following link:

Saxo Market Compass - 26 January 2026

Koen Hoorelbeke

Investment and Options Strategist

Saxo Bank

Topics: Macro Highlighted articles En hurtig tanke Macro ETF

Webinar: the FX Outlook from here and Mastering FX

Fri, 20 Jun 2025 11:30:00 Z

Saxo Global Head of Macro Strategy John J. Hardy discusses the lay of the land for currencies in the Trump 2.0 era.

Note: This is marketing material.

In this webinar, Saxo’s Global Head of Macro Strategy John J. Hardy takes you through the important new features in the geopolitical and geoeconomic landscape that will shape markets for years to come, delves into the outlook for the major currencies in this context and, making a number of directional calls. As well, some observations on how he views technical analysis as well as John’s answering of a number of great viewer questions.

John J. Hardy

Global Head of Macro Strategy

Saxo Bank

Topics: Highlighted articles Forex Macro

Invest in themes with Saxo

Wed, 09 Apr 2025 11:47:00 Z

Check out our recent presentation on how thematic investing can help you capture future trends and align your investments with your passions.

Agenda:

Welcome & introduction
- Introduce thematic investing and its growing popularity, highlighting why it can be both profitable and engaging.
What is thematic investing?
- Investing in trends and sectors shaping the future, offering targeted exposure and diversification, and alignment with personal interests.
Why invest in themes?
- Capture transformative trends early, diversify portfolios, and combine passion with profit.
Introducing the different Saxo themes
- 20 themes grouped into categories like AI, Robotics, Defence, Electric vehicles, etc.
Deep dive into a few selected themes
- A closer look at selected high-potential themes.
Get Started with thematic investing
- How to get started with Saxo Bank
Q&A

Jacob Falkencrone

Global Head of Investment Strategy

Saxo Bank

Topics: Equities Theme - Artificial intelligence Theme - Defence Theme - Electric vehicles Theme - Clean energy Theme - Big pharma Theme - Luxury Theme - Robotics and automation Theme - Digitalization Theme - Dividend growth Theme - Emerging market growth Theme - Genomics Theme - Green metals Theme - Precious metals Theme - Agribusiness Theme - Green transition Theme Category - Equities Theme - Oil and gas majors Theme - Women in leadership Theme - Construction Theme - Cyber security

Here's why you shouldn't be scared about volatile markets

Wed, 19 Mar 2025 12:38:00 Z

Understanding volatility: a beginner's guide to navigating the market

Volatility in the stock market can feel intimidating, especially for new investors. However, understanding it is a crucial step towards becoming a confident and informed investor.

What is volatility?

Volatility refers to how much and how quickly the price of an asset, such as a stock, fluctuates over time. Think of it as the market's "mood swings." While the global stock market has historically delivered an average annual return of about 8%, these returns come with periods of ups and downs—some dramatic, others mild.

Why does volatility matter?

For investors, volatility represents both risk and opportunity. High volatility means prices can change dramatically in a short period, offering chances for higher returns but also increasing the risk of losses. Low volatility, on the other hand, indicates more stable prices but generally lower potential gains.

How to handle volatility

Navigating volatile markets requires strategy and patience. Here are three key tips:

• Don’t try to time the market

Timing when to buy or sell based on market movements is extremely difficult, even for seasoned professionals. Attempting to do so often leads to missed opportunities.

• Diversify your portfolio

Diversification—spreading your investments across different asset types like stocks, bonds, real estate, and commodities—is one of the best ways to manage risk. Think of it as a balanced diet for your portfolio: it ensures you’re not overly dependent on any single investment.

In this video, you can get tips on how to diversify your portfolio in a simple way

• Stay focused on long-term goals

Short-term market fluctuations can be unsettling, but keeping your eyes on long-term objectives helps you stay grounded during turbulent times. Looking at your portfolio from day to day might give you a false picture of the reality. Zoom out and look at the bigger picture.

Embracing volatility

Volatility is not something to fear—it’s an inherent part of investing. By staying informed, diversifying your portfolio, and maintaining a long-term perspective, you can turn volatility into an opportunity rather than a challenge.

Stay informed, stay diversified, and remember that volatility is just one part of the investment journey. So embrace the ups and downs—they’re all part of the ride towards financial success!

Topics: Macro Highlighted articles En hurtig tanke ETFs ETF ETF Inspiration MSCI MSCI World Index Equities

Saxo Welcomes J. Safra Sarasin Group as New Shareholder

Mon, 10 Mar 2025 08:14:00 Z

We are pleased to announce that Bank J. Safra Sarasin AG is set to become a major shareholder in Saxo Bank, acquiring a 70% stake by purchasing shares from Geely Financials Denmark A/S, a subsidiary of Zhejiang Geely Holding Group Co. Ltd and Mandatum Group.

Share the news and refer a friend:

Refer a friend in SaxoTraderGo
Refer a friend in SaxoInvestor

This strategic partnership underscores our commitment to providing exceptional service and innovative solutions to our clients and partners worldwide. With Kim Fournais continuing as CEO and maintaining his significant stake, Saxo Bank will remain an independent entity, ensuring stability and continuity for all our stakeholders, employees, partners, and clients.

By combining the strengths of Saxo and Safra, we aim to enhance our offerings and set new benchmarks for client experience and innovation in the financial industry. Thanks to Geely and Mandatum for the support throughout the past seven years, and thank you to all our clients and partners for your continued trust and support.

For more details, please find the press release on our website.

Saxo

Topics: Saxo Spotlight Financials Stocks En hurtig tanke Equities

Saxo Bank announces record 2024 results

Mon, 03 Mar 2025 08:00:00 Z

The Saxo Bank Group announces its financial results for 2024, achieving the best results in the company's history. The Group reported a net profit of DKK 1,005 million for 2024, compared to a net profit of DKK 260 million for 2023, corresponding to an increase of 287%. The adjusted net profit for 2024 ended at DKK 1,074 million.

In early 2024, Saxo Bank implemented favorable reduced pricing for clients as part of its new global pricing strategy. This reduction is part of the ongoing commitment to improve the value offered to clients and is closely linked to the ability to provide cost-effective solutions alongside the bank's award-winning platforms, products, and services.

By meeting the clients’ needs and becoming a price-leader across many markets, Saxo Bank experienced sustained growth and reached a record of almost 1.3 million clients by the end of 2024, with all time high client assets of DKK 853 billion.

2024 key figures at a glance (2023):

Total income: DKK 4,670 million (DKK 4,481 million)
Net profit: DKK 1,005 million (DKK 260 million)
Adjusted net profit: DKK 1,074 million (DKK 653 million)
Total equity: DKK 6,254 million (DKK 6,366 million)
Total client assets: DKK 853 billion (DKK 745 billion)
Total number of clients: 1,286,000 (1,159,000)
Capital ratio: 29% (32%)

Commenting on the results, Kim Fournais, CEO and Founder of Saxo Bank, said:

“I am very proud to report that 2024 was the best financial year in Saxo Bank’s history. This is clearly a very satisfactory result for us. The progress underscores our steadfast commitment to creating value for all our stakeholders and strengthening our foundation for sustainable growth. With almost 1.3 million clients and client assets reaching an impressive DKK 853 billion, these milestones showcase the trust and confidence placed in Saxo Bank. Our comprehensive trading and investment platforms have provided robust tools and resources, enabling our clients and partners to navigate the markets efficiently and build more resilient, diversified portfolios.

The result is naturally also a large testament to the collective efforts of our employees who have driven Saxo Bank's performance and achievements this year.

In 2024, we welcomed several new initiatives to make Saxo Bank attractive for even more people. A few highlights are the introduction of more competitive prices across products and the launch of our automated monthly investing account known as AutoInvest. We also introduced our Investor platforms to more markets, enabling more curious people to get invested in the world.

Moving forward, our strategic focus remains unchanged. We continue to focus on growing our number of clients and client assets, and on enhancing the product and platform offerings to the benefit of our clients while focusing on our core markets.

In our commitment to protecting our clients and upholding the integrity of our business, Saxo Bank has continued to make significant investments and improvements in compliance, anti-money laundering, cyber security, and risk management. This will remain a core priority as well.”

The full report is available here: https://www.home.saxo/about-us/investor-relations

Saxo

Topics: Saxo Spotlight Financials Stocks

Don't put all your eggs in one basket

Thu, 27 Feb 2025 11:36:00 Z

How to Build a Diversified Portfolio with ETFs

Diversification is a cornerstone of successful investing. It helps reduce risk by spreading investments across various financial instruments, industries, and regions. But how can you achieve this efficiently? Exchange-Traded Funds (ETFs) offer a simple, yet effective way to create a well-diversified portfolio, tailored to your goals and beliefs.

What is Diversification?
Diversification means not putting all your eggs in one basket. By investing in different asset classes, sectors, or regions, you minimize the impact of poor performance in any single area. This strategy smooths returns over time and reduces overall portfolio risk.

What Are ETFs?
ETFs are investment funds traded on stock exchanges, similar to stocks. They hold a collection of assets like stocks, bonds, or commodities and are designed to track the performance of specific indices or sectors. This makes them an accessible tool for both new and experienced investors.

Benefits of Using ETFs for Diversification

Broad Exposure: ETFs provide access to various asset classes and sectors. Whether you're interested in technology, healthcare, or emerging markets, there's likely an ETF that aligns with your interests.
Cost Efficiency: ETFs often have lower expense ratios compared to mutual funds, making them a cost-effective choice for long-term investors.
Ease of Use: Instead of buying individual stocks or bonds, you can invest in a basket of securities with one transaction. This saves time and reduces transaction costs.
Flexibility and Liquidity: ETFs can be bought and sold throughout the trading day at market prices, allowing investors to respond quickly to market changes.
Transparency: Most ETFs disclose their holdings daily, giving you clear insight into what you're investing in.

Building Your Portfolio with ETFs
To build a diversified portfolio using ETFs:

Choose Different Asset Classes: Include stocks, bonds, and possibly commodities.
Diversify Across Sectors and Regions: Invest in multiple industries and geographic areas.
Rebalance Regularly: Adjust your portfolio periodically to maintain your desired asset allocation as markets fluctuate.

Not sure how to rebalance your portfolio? This video will provide you with the answers:

Conclusion ETFs are a powerful tool for achieving diversification. They offer exposure to a wide range of assets while being cost-effective, flexible, and easy to manage. By incorporating ETFs into your investment strategy, you can build a resilient portfolio that aligns with your financial goals.

Topics: ETFs Highlighted articles En hurtig tanke Macro ETFs ETF ETF Inspiration MSCI MSCI World Index

Is it time to rebalance your portfolio?

Thu, 16 Jan 2025 15:14:00 Z

Revitalize Your Portfolio: A New Year’s Guide to Rebalancing

Now that 2024 turned into 2025, it's the perfect time to give your investment portfolio a fresh start. Much like the legendary investor Warren Buffett, who is known for his strategic moves in the market, investors are encouraged to take a closer look at their portfolios and consider rebalancing to align with their financial goals and risk tolerance.

The Importance of Rebalancing

Rebalancing is similar to maintaining a garden. Over time, market fluctuations can alter your asset allocation, potentially exposing you to unintended risks. By rebalancing, you ensure that your portfolio remains aligned with your investment strategy, providing stability even as markets fluctuate.

Strategies for Rebalancing

There are two primary approaches to rebalancing your portfolio: calendar-based and threshold-based strategies. The calendar-based method involves reviewing and adjusting your portfolio on a set schedule, such as semi-annually or annually. The threshold-based approach requires adjustments when asset allocations deviate from predetermined percentages. Choosing the right method depends on your investment style and time commitment.

Steps to Effective Rebalancing

To effectively rebalance your portfolio, follow these steps:

Assess Current Allocations: Evaluate your current asset distribution.
Compare to Target Allocations: Identify discrepancies between current and target allocations.
Adjust Holdings: Buy assets that are below target and sell those that exceed target allocations.
Document Changes: Keep a record of all adjustments for future reference.

Avoiding Common Pitfalls

Investors often face pitfalls such as emotional decision-making and neglecting to rebalance. It's crucial to maintain a consistent strategy and consider factors beyond asset classes, such as geography and sectors. Avoid trying to time the market, as this can lead to missed opportunities.

Conclusion: A Well-Balanced New Year

As we step into the New Year, take a cue from seasoned investors and ensure your portfolio is working as hard as you are. By avoiding common mistakes and implementing a robust rebalancing strategy, you can set the stage for a prosperous and well-balanced financial future. Remember, the key to successful investing is sticking to your long-term strategy and not making rash decisions based on short-term market movements. Here's to a prosperous New Year!

Topics: Macro Highlighted articles En hurtig tanke Equities

Will Elon Musk's alliance with Donald Trump help Tesla fast-track their technologies?

Mon, 30 Dec 2024 12:54:00 Z

The Musk-Trump Alliance: Tesla's Stock Soars

In the ever-evolving landscape of American politics and business, an unexpected partnership has emerged, sending shockwaves through the stock market. The alliance between newly re-elected President Donald Trump and Tesla CEO Elon Musk has not only captured headlines but also propelled Tesla's stock to unprecedented heights.

The Unlikely Partnership

Donald Trump, known for his skepticism of electric vehicles and green energy initiatives, has found an unlikely ally in Elon Musk, the eccentric billionaire behind Tesla and SpaceX.

This partnership has led to a significant shift in Trump's rhetoric on electric vehicles, with the President now stating, "I'm for electric cars".

Tesla's Stock Skyrockets

The impact of this alliance on Tesla's stock has been nothing short of remarkable:

Tesla's stock hit an all-time high of $488 per share
The company's market value surged by 73% in 2024
November alone saw a 38% increase, marking Tesla's best monthly performance since January 2023

The Musk Factor

Elon Musk's influence on this rally cannot be overstated:

Musk invested $277 million in Trump's campaign
He's been a constant presence at Trump's Florida resort, Mar-a-Lago
Trump appointed Musk to co-chair the new 'Department of Government Efficiency'

What This Means for Tesla

Investors are betting big on Tesla for several reasons:

Regulatory Relief: With Musk's influence in the White House, Tesla might face less scrutiny from federal agencies
Self-Driving Cars: There's hope for fast-tracked federal framework regulations on autonomous vehicles, potentially giving Tesla an edge
AI Advancements: Wall Street sees Tesla as an undervalued AI player, especially in the realm of self-driving technology

The Risks

Despite the optimism, there are potential pitfalls:

The possibility of eliminating EV tax credits could hurt Tesla's sales
State-level investigations into Tesla remain a concern
The Tesla brand could become associated with political alliance, reducing Tesla's market share potential

What's Next?

As we look to the future, the Musk-Trump alliance has undeniably reshaped the landscape for Tesla and the entire electric vehicle industry. Whether this partnership will continue to boost Tesla's fortunes or lead to unexpected challenges remains to be seen.

In the world of stocks, what goes up can come down. As with any investment, it's crucial to do your own research and consider your long-term strategy before making decisions based on short-term market moves.

This content is marketing material and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options.

John J. Hardy

Global Head of Macro Strategy

Saxo Bank

Topics: Equities Highlighted articles En hurtig tanke Macro Tesla Tesla Motors Tesla Inc. EV Electric Vehicle Vehicle Artificial Intelligence

These commodities might be impacted by the US election

Tue, 08 Oct 2024 11:22:00 Z

This content is marketing material.

The outcome of the US election could potentially be a key factor in the price development of certain commodities. In this video we will take a closer look at potential winners and losers after the US election in November.

Trump win

If Donald Trump decides to introduce these tariffs on Chinese imports, that might lead to an increase in inflation, and potentially force China to add tariffs on US food commodities which will hurt the US farmers and their possibility to export products such as corn and soy beans.

Harris win

With a Harris win, an introduction of unfunded spending on social projects could potentially lead to higher inflation. Fossil fuel investments might take a hit as well, given the increased focus on green energy and electric vehicles.

Conclusion

No matter the outcome, an increased spending will need extra funding, and without a tax raise, the US debt level is likely to increase even more, which will add to the risk of an increased inflation level.

All of these factors might lead investors to look for safety and that has historically pointed towards investment metals where gold is likely to benefit from that increased focus.

This content is marketing material and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options.

Ole Hansen

Head of Commodity Strategy

Saxo Bank

Topics: US Election 2024 Highlighted articles Commodities En hurtig tanke Macro

Cramer's Corner: Daily Technical Update

Tue, 29 Aug 2023 06:52:28 Z

Cramer’s Corner: Daily Technical Update

Kim Cramer Larsson hosts the Daily Technical Update, a daily 8-10 minute video with live charts.
Kim takes you through the latest technical developments in financial markets, covering everything from the major stock indices, widely traded single stocks, commodities, currencies and interest rates

In today’s Technical Update:

S&P 500. Shoulder-Head-Shoulder Top & reversal pattern could be unfolding. Key support at 4,340. Cancelled above 4,459
Nasdaq 100. In downtrend. Key support at 14,687. Next at 14,254
Hang Seng testing resistance at 18,562 resist. A close above could lead to 19K. But is likely to resume downtrend
DAX Key support at 15,482
AEX25 downtrend. key support at 731.Next support at 716. Resistance at 748
BEL20 downtrend. Key support at 3,550
CAC40 Downtrend. Key support at 7,083
EURUSD downtrend but could see a short-term bounce to 1.09
Dollar Index uptrend. Room to 104.82. Strong resistance at 105.80. expect short-term correction to 103.00
GBPUSD downtrend. Hovering around key support at 1.2590. Could bounce to 1.27-1.2750 before downtrend to resume
USDJPY uptrend intact. Strong resistance at 146.35. Below 144.50 expect correction to 143
EURJPY uptrend but short term range bound
Gold downtrend but bouncing from below 1,900. Strong support at 1,870
Copper rejected at 382 likely to resume downtrend
Silver Bullish but resistance at 24,50
Platinum short-term bullish but facing strong resistance
Palladium range bound 1,200-13,45
Brent correction ongoing. Likely to be range bound between 81.75 and 88.20
Dutch Gas Bullish sentiment but struggling for momentum
US 10-year Treasury yields top and reversal pattern could correct to 4.10-4.00
US 10-year Treasury future Doji Morning bottom and reversal

Follow me for more on SaxoTrader platforms, home.saxo and Twitter: Cramers_Corner

Kim Cramer Larsson

Technical Analyst, Saxo Bank

Saxo Bank

Topics: Technical analysis Cramers Corner

Summary Q2 2023 Outlook: The Fragmentation Game

Tue, 04 Apr 2023 06:00:00 Z

This Quarter's Outlook, "The Fragmentation Game", is our view on how a new world order forces you to reconsider your investment strategy. Read it today.

An Executive Summary

The sudden March advent of turmoil in US banks, and then a mere week later, the SNB-engineered weekend takeover of Credit Suisse by UBS, sent shockwaves through global markets in March. We scrambled to work through the consequences, as we were in mid-stream with the preparation of this Q2 Outlook. In this publication, we have endeavored to address this crisis, which will have important short-, medium- and long-term consequences for both banking systems and our economies. The crisis has sharply brought forward the coming recession, for example. In the intro to this publication, our CIO, Steen Jakobsen, leads readers through the implication of the sudden bank turmoil that unfolded late in Q1, noting that this is no 2008-09 solvency crisis, but the result of the spike in the cost of funding.

But we also touch extensively on the originally intended theme for this Outlook, which is The Fragmentation Game. This is our term for what many call “deglobalisation”, a term we find too vague. As Steen Jakobsen points out, the word fragmentation better describes how the process of deglobalisation works, as the world’s economic blocs have lurched into a profound realignment that will play out over coming decades. The game has begun for every nation to ensure that all critical supply chains, whether for medicine, energy, vital resources, technology or defense, are either completely at home or with a friendly trading partner, or ideally, both.

Our Hong Kong-based strategist, Redmond Wong, looks at the challenges China faces as it boldly carves out a more prominent role in multi-lateral global institutions, deepens strategic trade relationships and reduces its reliance on exports for the first time in the modern era. Securing technology, and especially resources, will be China’s chief challenges. Our macro strategist, Charu Chanana, focuses on Southeast Asia’s, and especially India’s, enormous potential in a fragmenting world. She weighs, for example, India’s strong demographic profile and huge upside potential in manufacturing against the nation’s traditional speed-limiters like protectionism and burdensome bureaucracy.

Our equity and quant strategist, Peter Garnry, looks into the equity market impact from the banking crisis after the year had gotten off to a roaring start for many pockets of the equity market, with Europe a strong performer on avoiding an energy crisis. He also delves into where the Fragmentation Game will provide both pain and opportunities in equities. The obvious sectors in focus include semiconductors, defence, renewable energy, logistics, larger companies, and especially quality companies with low debt and strong competitive characteristics.

Our macro strategist, Christopher Dembik, looks at the risk of where the banking crisis could take the US economy next, namely into recession eventually, but focuses readers’ attention on the heavy concentration of commercial real estate loans in smaller and regional US banks as a potential next-shoe-to-drop. The real estate angle is critical to watch in Europe and the UK as well.

In FX, strategist John Hardy notes that the interest rate cycle has now turned sharply and ponders the forward policy mix and jockeying among currencies as stimulus to soften the impact of further financial system turmoil, and eventually the incoming recession will have to take a very different form relative to the crises we have known over the last 25 years. Japan knows the playbook, as it will almost inevitably involve some form of yield curve control.

In commodities, Ole Hansen discusses how the China re-opening surge in commodities fizzled in Q1, but notes it is too quick to write off the potential for commodities: parts of the Fragmentation Game, like the electrification of much of our energy, are very metal-intensive, especially copper-intensive. And the traditional inflation hedge of precious metals has already revived in Q1, with gold posting a record high against several major currencies.

Finally, Investment Coach Hans Oudshoorn relays how investors can hedge downside in their equity positions using a popular approach: an options collar that involves buying a put that is at least in part financed by selling a call option, providing an example on an underlying S&P 500 future position.

We wish you a safe and prosperous Q2 and beyond. The stakes for investors for the remainder of this year and beyond have risen with the latest market turmoil, and the Fragmentation Game will require all of us to consider how the world is ordered and what its reconfiguration will mean for our investments for the coming quarters, years and decades.

Steen Jakobsen

Chief Investment Officer

Saxo Bank

Topics: Quarterly Outlook Monthly Newsletter

Q1 2023 Outlook The Models are Broken

Tue, 07 Feb 2023 07:00:00 Z

Models are used everywhere in the financial world. But what do you do when the models you use don't work anymore? That's what this Quarterly Outlook is all about.

An Executive Summary

In the introduction to this outlook for early 2023, Saxo CIO Steen Jakobsen argues that our economic models and our assumptions for how market cycles are supposed to work are simply broken. And so should they be, as why should we even want to return to the ‘model’ of central banks engaging in moral hazard and bailing out incumbent wealth, rentiers and risk takers, the rinse-and-repeat we have seen in every cycle since Fed Chair Greenspan bailed out LTCM in 1998? This new post-pandemic and post-Ukraine invasion era we find ourselves in has brought an entirely new set of imperatives beyond bailouts and reinflating asset prices. Instead, we need to brace for the impact of higher inflation for longer as we scramble for supply chain reshoring and redundancy, and as we transform our energy systems to reduce reliance on fossil fuels and reduce our impact on the climate. And it won’t be all pain for all assets. Quite the contrary; it will bring a refreshing return of productive investment and a brighter future for everyone.

The return to more productive deployment of capital will have to mean investing more in the real, physical world to accomplish the new set of supply chain and resource access imperatives, not pouring money into digital platforms that capture excess profits by monopolising markets and user attention. On that note, our equity strategist Peter Garnry looks at whether the multiple decades of underperformance for equities dealing in tangible assets is ending, with intangibles and financials set to underperform after decades of excess financialisation. He also pokes into the geographies that look the most interesting as supply chains diversify.

Our macro strategist Christopher Dembik notes that the worst outcomes for Europe in the wake of the EU shutting itself off from cheap Russian energy were thankfully not realised. Danger and opportunity lie ahead for Europe, which faces the steepest challenges in the new world order, but where the sense of crisis will bring the needed change the quickest. As well, Europe is set to benefit from China, its largest trading partner, coming back online this year. Our market strategist for Greater China, Redmond Wong, looks at where the most potential lies in Chinese equities after China executed a seeming total about-face in its zero-Covid tolerance and other policies that cracked down on the property and technology sectors and were presumed to be the hallmarks of rule under Xi Jinping. Charu Chanana, our market strategist in Singapore, picks up on the rest of Asia, weighing the relative value across several Asian markets. She argues that India and also the traditional exporters will benefit both from renewed demand from China and from investment by both China and OECD countries looking to leverage production – and supply chain diversification potential.

In commodities, Ole Hansen looks at the potential for the extension of a bull market in industrial metals as China, the world’s largest commodity consumer, returns in force from lockdowns and not least, as the metal-intensive investment in green energy deepens. The end of China’s lockdowns will also boost crude oil demand by the most in years as China normalises air travel levels. On the supply side, the avoidance of Russian crude and the end of risky, massive drawdowns of much of the US strategic reserves will weigh. Gold could be set to thrive with a turn lower in the USD, but also as a growing roster of countries looks for alternatives to the greenback for maintaining reserves and conduction trade outside the USD system. Our strategist in Australia, Jessica Amir, breaks down what Australia has to offer as a formidable exporter of resources and list of Australian resource companies involved in everything from the EV-battery supply chain to iron ore and gold.

With the return of solidly positive interest rates after the seeming endless years of ZIRP and NIRP, especially in Europe, Peter Siks of our CIO office looks at a far better expected return for the traditionally balanced portfolio. This is somewhat ironic, given that 2022 offered the worst nominal returns for traditionally ‘balanced’ stock and equity portfolios in modern memory.

FX strategist John Hardy looks at the potential for a turn lower in the USD this year and the likelihood of a much stronger JPY in the first half of the year, chiefly driven by its late-comer status to the central bank tightening party and the exit. Finally, crypto strategist Mads Eberhardt sees the risk of more challenges ahead for crypto, particularly the smaller cryptocurrencies as retail participation risks continuing to wither, even as the longer term prospects will brighten in line with the deepening institutional participation in the space in coming years.

We wish you a safe and prosperous 2023. We strongly believe that markets and the global economy are entering a new era. It won’t be an easy transition, but all great transitions bring exciting new opportunities for those willing to walk away from the old assumptions and to look at how their investments and efforts can contribute to the new world taking shape before us.

Steen Jakobsen

Chief Investment Officer

Saxo Bank

Topics: Quarterly Outlook Monthly Newsletter

Daily Dose of financial insights for investors and traders; retailers not exposed to China surge 20%, those pegged to Chinese demand crumble

Sun, 27 Nov 2022 22:30:00 Z

Six minute video insights for investors and traders; retailer shares not exposed to China surge 20%, while those pegged to Chinese demand such as Jd.com crumble. Here is what to watch this week that could be the next catalysts for equities from PCE data to jobs. Plus why commodities could be at risk with iron ore shipments falling ahead of the latest China lockdowns.

S&P500 is out of a bear market; retailers outperform, China exposed stocks cop a blow. Nasdaq 100 still in the bear woods, down 40%

The S&P 500 rose 1.6% last week with retailers shares rising the most; Best Buy rose 12%+, Ross Stores followed), while China’s Jd.com fell 12%. All in all; the S&P500 is up 12% from its October low and 16% away from its all-time high (meaning it’s officially out of a bear market). While the Nasdaq 100 is still in a bear market, down over 40% from its high, and up just 10% from its October low after gaining 0.7% last week. This shows tech investor are concerned as Chinese covid cases are rising and forward earnings is likely to be diminished again. A lot of tech companies are pegged to Chinese consumer demand, and a lot of tech companies make their products in China (Apple makes most of its iPhones in China). As for what to watch this week that could cause market volatility; America’s ADP employment data, GPD estimates, consumer confidence and the closely watched Personal Consumer Expenditures (PCE) are released. Given the Fed meets in just three weeks it will be watching for further clues inflation is slowing and that employment is waning (which is expected), as that gives it impetus to be less aggressive with hikes.

The Australian share market is just 5% off its all time high; but seems vulnerable

The Aussie share market has gained 12% from its October low, after rising 1.5% last week; with Virgin Money was up the most last week, about 23%, on upgrading its outlook, while gold company Ramelius Resources rose 15% on maintaining its production outlook. This week stocks exposed to China are vulnerable of a pullback given forward earnings are likely to be downgraded following further China lockdowns and protests. So be mindful investors could be looking to take profits or write options for downside protection on China concerns. It also means commodities, oil – iron ore, copper, lithium may see demand slow down and their prices fall – that’s important as its underpin some of our largest companies profits. Fresh data on Friday showed the major iron ore companies, BHP, Rio, Fortescue, will be shipping almost 6% less than last year in the final quarter of this year. So the risk is the situation in China worsens, iron ore shipments could continue to fall and hurt iron ore majors earnings and shares. Early Monday morning, iron ore trades 0.6% lower. Inversely; note that stocks not exposed to China could likely continue to rally given it’s the first Christmas with no global lockdowns (excluding China). Consider looking at retailers doing well following Black Friday sales and ahead of the likely Santa rally; Shares in JB Hi Fi, Harvey Norman, Premier Investments (owner of Jay Jays and Peter Alexander) are all trading up 20% from June. So they could be worth watching as examples.

Asian markets are on notice this week

All eyes are on Hong Kong’s Hang Seng and China’s CSI 300 which could be vulnerable of pulling back and trimming their 20% and 8% respective gains from their October lows, amid new lockdowns and unrest.

Commodities in focus; demand likely to slow from China, production increases

Oil (WTI) trades 0.3% lower in early trade Monday at $76.01 after falling 2% on Friday, losing almost 5% in total over the week. The bottom line is oil prices almost back at January levels on forward demand likely slowing, while production is rising. BP is restarting its Rotterdam refinery. Iraq plans to start increasing oil export capacity from its southern ports from 2023, adding up to 250,000 barrels a day next year and as much as 1.5 million by 2025. This is good for consumers and inflation though, and it also gives room for the share market to be supported higher as the Fed has ammunition to be less aggressive with rates (if inflation pressures from oil remain contained).

For a weekly look at what to watch in markets - tune into our Spotlight.

For a global look at markets – tune into our Podcast.

Jessica Amir

Market Strategist

Saxo Markets

Topics: Equities Featured Market Update APAC Equities Commodities Inflation InflationSG Asia Asia-Pacific Themes APAC Europe European Union (EU) Wheat Weekly Newsletter Weekly Outlook APAC Market Digest

Q4 2022 Outlook Winter is coming

Tue, 04 Oct 2022 04:00:00 Z

The macropolitical and economic landscape has sent freezing weather in over the financial markets. How will you navigate the cold winter?

An Executive Summary

Our outlook for Q4 2022 simply recognises the reality that winter is coming, in both the literal and figurative senses. First is the literal sense as Europe and the UK in particular brace for the impact of a winter season that will likely bring with it an economic winter. The power and gas crisis will reach peak impact due to the increased demand during winter heating season, even if prices have fallen considerably. Our macro strategist Christopher Dembik focuses on how Europe can absorb the tremendous headwinds of the energy crisis without turning the lights out entirely, with observers excessively pessimistic on the European outlook. This will include reducing demand through more efficiency, longer-term investments in nuclear, and better buildout of the necessary infrastructure for the green transformation.

In China, our market strategist Redmond Wong notes that the focus on renewables is far less intense. China has moved to secure coal supplies amidst the spike in oil and especially LNG prices in recent quarters, preferring to focus on more efficient use of its coal-fired baseload capacity and the most aggressive buildout of nuclear power of any major economy. For the rest of developed and emerging Asia, market strategist Charu Chanana notes that the soaring prices for LNG have altered the energy security for the region, to the detriment of weaker economies. The response will come in a variety of forms, from Japan’s renewed interest in nuclear despite the 2011 Fukushima disaster, to the intriguing prospect of energy increasingly trading in non-US dollar currencies, as already seen in India’s purchase of Russian crude with roubles. Our Australian market strategist Jessica Amir zeroes in on the factors driving a renaissance of interest in nuclear energy and looks at where to find the companies and ETFs in a rather difficult-to-navigate nuclear investment space.

Now on to the chief driver of asset valuations since the Fed’s dramatic pivot in November of last year: the trajectory of monetary policy. The coming quarter and first part of winter are likely to bring what Saxo CIO Steen Jakobsen dubs “peak tightness”. The market will finally manage to catch up to where the peak Fed rate is likely to rise by early next year, after getting it so wrong in hoping for a policy pivot toward decelerating tightening pressure in Q3. In turn, that policy tightness will lead to a recession, already on the way in Europe but spreading elsewhere next year, eventually even to the US, where the economy has proven far more resilient than the market expected.

In equities, the emphasis from the head of equity and quant strategy Peter Garnry is on how the coming winter will inevitably drive recession risks, as already seen with the pressure on consumer and discretionary stocks. He also explores how the extraordinary pressure on Europe can drive necessary innovation that should allow the continent to come out the other side with a far more competitive economy. Still, an overriding risk for growth and equity valuations is the cost of de-globalisation, which will reverse many of the trends in equities and the supply chains that companies have hyper-tuned over the last 12 years.

Head of commodity strategy Ole Hansen sees less drama for commodities relative to the intense volatility in the months since Russia invaded Ukraine, as ongoing supply concerns vie with shrinking demand concerns for supremacy. One interesting twist in Q4 will be how the crude oil market absorbs a halt of the Biden administration’s release of US strategic reserves if this proceeds according to plan in October.

In the FX outlook, John Hardy, the head of FX strategy, asks whether peak tightness in the anticipated trajectory of the Fed rate hike cycle will likely also bring peak US dollar, which has provided its own wintry pressure on global liquidity and asset prices for the last eleven months. Elsewhere in FX, will the market force the Bank of Japan to capitulate on its yield-curve-control policy, possibly setting up the yen for spectacular volatility this coming quarter? It’s also worth noting that this is the third quarter running in the massive divergence of the JPY weakness relative to Chinese yuan (CNH and CNY) strength, the latter still in relative terms despite the yuan being allowed to slip considerably lower versus the strong USD in Q3; it’s an important and tense situation that remains unresolved.

In crypto, the market failed to revive in the quarter even with a much-anticipated Ethereum platform shift to proof-of-stake from proof-of-work. As our crypto strategists Mads Eberhardt and quant strategist Anders Nysteen suggest, the risk of a “crypto-winter” continues as global liquidity dries up on the headwind of policy tightening, not to mention the fear of stricter regulation of the space. Still, there are plenty of bright spots, with burgeoning innovation in the industry finding new applications for crypto-related blockchain technology.

Finally, this outlook also features the usual rundown of the longer-term technical outlook for critical assets, as we revisit the critical US 10-year treasury yield chart, the US S&P 500 index and where the ultimate depths of this bear market may lie, and the EURUSD exchange rate after the symbolic parity level was reached—and then some—on the downside in Q3.

We wish you a safe and prosperous Q4. Given the stark challenges that lie ahead for asset markets in a world beset with grinding supply side challenges, and as policymakers clamp down to fight inflation, it’s a difficult time. At the same time, it’s worth keeping in mind that opportunity and longer-term market returns rise as a function of deteriorating current asset prices.

Explore products at Saxo

Steen Jakobsen

Chief Investment Officer

Saxo Bank

Topics: Quarterly Outlook

Q3 2022 Outlook: The Runaway Train

Tue, 05 Jul 2022 04:00:00 Z

The market fails to understand that we have shifted into a new paradigm for the economy, inflation and the incoming policy response. Inflation will prove a runaway train that central banks can only chase from behind until the inflationary dynamics result in a crash into a hard recession.

An executive summary

Our outlook for Q3 2022, and really for the balance of the year, argues that the market fails to understand that we have shifted into a new paradigm for the economy, inflation and the incoming policy response. Inflation will prove a runaway train that central banks can only chase from behind until the inflationary dynamics result in a crash into a hard recession. But that eventual recession won’t mean that we are set for mean reversion back to disinflation and calm conditions. That’s because inflation is here to stay, driven by deglobalisation and supply-side shortcomings from decades of underinvestment in the physical world, as policy was overgeared toward pumping up leverage and ever greater financialisation of the economy. Over 40 years of falling yields and ever greater policy stimulus after every recession since the early 1980s, the final period was characterised by zero- and negative-policy rates and, even more importantly, negative real rates that drove tremendous malinvestment. Now, we have entered a new super cycle of greater volatility and a higher background inflation level. With monetary policy sidelined, fiscal dominance will mean that inflation is as much a feature as a bug, because it is the only option policymakers can take for deleveraging our over-indebted economies.

In equities, we argue that the market has undergone one of its largest sentiment shifts in the past 100 years in just six months. This was after it dawned on the market that the famed Fed put has been thrown out the window as the Fed finally realised it must focus single-mindedly on tightening conditions until inflation is reined in. Given our macro theme that the supply side of our economy has suffered underinvestment, the new landscape for equities should favour tangible assets such as logistics, commodities, renewable energy, infrastructure and defense. The energy sector is the only positive sector in US equities this year and, with its rising importance in equity indices, we foresee a potential crisis in environmental, social and governance (ESG) funds due to their significant underweight in oil and gas stocks. Elsewhere, we feature an equity focus piece on commodity-related stocks, naming names that offer exposure to a variety of commodities and noting the current risks to the green transformation theme.

Given our focus on inflationary risks due to the physical world being unable to keep up, it is interesting that our commodities outlook notes that commodities are fretting risks to the downside in the short to medium term as the market predicts an incoming recession due to the policy tightening and a demand adjustment after severe price rises over the last year. But for the longer term, decades of underinvestment in capacity and the need for the metal-intensive push for a more carbon-neutral future leave us convinced that commodities remain in a rising super cycle.

In currencies, we assess where we are in the strong USD cycle as the Fed is now forced into the position of continuing to tighten policy ‘until something breaks,’ with the USD possibly not peaking and turning over until we are clearly heading for a hard landing, even as other central banks are largely seen matching and even exceeding Fed policy tightening. The euro is in a tough spot as it tries to tighten while avoiding policy fragmentation due to the foundational challenges of the Economic and Monetary Union (EMU), as we discuss in a focus piece on Europe and the European Central Bank (ECB). We also feature a separate focus piece in currencies on the Japanese yen—the Bank of Japan has doubled down on its yield curve control policy that is seeing it lose control of its balance sheet as it intervenes to defend yield caps on Japanese government bonds. This could potentially mean that we are set for an explosion in JPY volatility if market forces and realised inflation in Japan become unbearable later this year.

Our European focus in this outlook is squarely on the ECB and the euro. The ECB is set to announce a new tool in Q3 to keep sovereign spreads under control. It may manage to do so, but what about the euro itself? Shortly put, the eurozone could well end up in crisis territory once again if the ECB lags too much behind its global peers in tightening policy. But that does not have to be entirely negative. From 2012 onwards, crisis has at every turn prompted new institutional reforms which have strengthened the eurozone framework. The second half of this year will prove critical for the eurozone.

The weakness in the Chinese economy due to the country’s zero-Covid policy has been an outlier this year. Our outlook focus piece on China judges the road ahead for the country to be likely bumpy through this winter and into early next year, as it appears intent on stopping any uncontrolled spread of the virus, with only hesitant offsetting stimulus measures. Still, long-term perspectives for China are in order as we look at the country’s huge initiative in transforming its economy away from the factory-of-the-world era to a new ‘dual-circulation’ paradigm led by high-tech prowess and increased self-reliance.

In our crypto coverage, we note that the crypto market has come under heavy pressure this year with the vicious tightening on global liquidity that has devastated risky assets of nearly every stripe. All parts of the crypto market are under pressure, from crypto traders to crypto service providers. Some claim this can serve as a healthy clean-up of the industry by removing overleveraged speculators and exposing unreliable and untenable crypto services. Going into Q3, cryptocurrencies are in limbo, awaiting changes in the general macroeconomic sentiment, regulation and breakthroughs in institutional adoption of crypto technologies.

Finally, this outlook also features a rundown of the longer-term technical outlook for critical assets, particularly the longer US treasury yield and Nasdaq-100 Index after US equity markets entered a bear market in Q2, as well as the USD Index and Brent crude oil.

Explore products at Saxo

Steen Jakobsen

Chief Investment Officer

Saxo Bank

Topics: Quarterly Outlook

Q2 2022 outlook: The End Game has arrived

Tue, 05 Apr 2022 04:00:00 Z

Our outlook for Q2 2022 argues that we are witnessing nothing less than the arrival of the end game for the paradigm that has shaped markets since the advent of the Greenspan put in the wake of the LTCM crisis of 1998. The twin shocks of the pandemic and Russia’s invasion of Ukraine have shifted priorities on all policy fronts, including fiscal, monetary and geopolitical. In the US, the imperative for the Fed to grapple with spiralling inflation risks has disrupted the traditional rinse and repeat of bailing out financial markets and the economy at the first ripple of trouble. Shortly put, the strike price of the “Powell put” is far lower than it was a year ago—the Fed must get ahead of the curve. In Europe, the Russian invasion of Ukraine has seen Germany tossing decades of fiscal and defence policy out the window, ushering in a new era of investment that should drive a strong rise in productivity. EU existential risks have disappeared as defence priorities soar above all other considerations. Helmets on, as 2022 will prove a wild ride for global markets.

Our macro outlook picks apart the argument that we are seeing a repeat of the 1970s as the world faces a supply shock unlike any it has previously seen. It’s one that risks a “great erosion” as negative real rates erode purchasing power on all levels and rising costs erode profit margins for corporations. Productivity must eventually improve to address this, but the prospects for productivity gains from the green transition are questionable.

In fixed income, the outlook focus is on the rapid flattening of the US treasury yield curve as an inversion threatens and points to rising recession risks. We also look at rising yields across Europe on a less accommodative ECB and, given the new fiscal expansion, what this could mean for EU peripheral spreads. In the credit space, central bank tightening will continue to turn the screws on credit spreads, possibly risking a tantrum at some point.

In equities, our focus is on equity valuations under siege from supply-side constraints, rising input costs and the prospect of far higher interest rates. Winners from here will be companies that can boast strong innovation, pricing power and profitability. In Europe, companies that absorb the enormous new fiscal push in defence, energy and other industries will likely benefit. We also present a special feature piece on cybersecurity, an industry that was already booming before Russia’s invasion super-charged focus on cybersecurity vulnerabilities on all levels—government and corporate.

In commodities, the focus is on the continued upside risk for oil that was already in place before the Russian invasion of Ukraine badly aggravated forward supply uncertainty. We also look into a supportive backdrop for industrial metals on the priorities of new military spending, the metal-intensive green transition and—as Russian supplies are disrupted—on sanctions. Elsewhere, rising food prices remain a risk as a corollary of rising energy prices, but also if this year’s Ukrainian wheat crop can’t get to market, as it is a major exporter. The gold story remains bullish as an inflation hedge and as long as real rates remain negative.

In currencies, the focus is on the potential comeback for the euro on the massive shift in fiscal outlays that has been triggered by the Russian invasion of Ukraine. This will keep more of EU savings in the EU and deepen capital markets there. We also break down how spiralling inflation and the sanctions against Russia’s central bank have likely accelerated the move away from USD primacy as the global reserve asset of choice.

Finally, this outlook features a rundown of the technical outlook for important assets from gold and crude oil to US equities, and in particular the remarkable multi-decade perspective on the Dow Jones Industrials.

Steen Jakobsen

Chief Investment Officer

Saxo Bank

Topics: Quarterly Outlook

Q1 2022 outlook: Fuelling the energy crisis

Tue, 25 Jan 2022 07:00:00 Z

Q1 2022 outlook: Fuelling the energy crisis

Executive summary

Our outlook for early 2022 explores the overriding risk of an energy crisis developing this year due to years of underinvestment in mission-critical baseload energy—the fossil fuels and nuclear energy that are still the overwhelming energy inputs into our economy. The climate agenda and focus on reducing CO2 emissions is the right one for the long-term future, but 2022 will be the year in which policymakers discover that the current roadmap toward long-term climate targets is out of touch with reality. Focusing excessively on EVs and the current menu of alternative energy options while neglecting baseload fossil fuel and nuclear will only lead to an energy crisis ahead. Europe is already at the heart of the baseload crisis and will continue to be so in the coming year. The EU will be the first major economic bloc forced to revamp its energy infrastructure and allow natural gas and nuclear back in from the cold.

In equities, we look at the incredible current under-representation of the energy sector in equities, which makes up a meagre 2.7 percent of the S&P 500 market cap at the end of 2021 versus more than 16 percent at their major peak in 2008 and 10 percent in early 1995. We have also drawn up an inspirational list of some 40 companies across the global fossil fuel, nuclear and new energy landscape. We expect the sector to deliver strong returns in coming years, as market valuations are very stretched in most of the sectors that did well last year.

In commodities, a strong focus in 2022, we look not only at the upside potential for oil and gas, but also nearly every industrial metal due to the metal intensity of alternative energy sources, from wind turbines to EV batteries. The underinvestment that has brought us to the current state of weak supply will continue until ESG standards for lending into mining and upstream oil and gas production are softened. Greenflation will persist as a buzzword in 2022 with further uncomfortable inflation in commodities possibly spreading to the major agricultural products as fertiliser prices are set to spike in the next growing season after this winter’s natural gas crisis. Many don’t realise that much of the fertiliser used to increase the crop yields that are our “food baseload” are produced by stripping natural gas atoms of their hydrogen to produce ammonia compounds; so we even “eat” fossil fuels, in a way.

In the fixed-income markets, the focus this year will be on central banks’ increasingly aggressive stance as they lean against the powerful inflationary pressures that worked up a head of steam in the second half of 2021. Yield curves will likely bear flatten, with policy rate hikes raising yields at the front end of the curve while longer yields struggle to keep pace. The latter will be held down by weak long-term real growth prospects. Long-duration bonds and assets will likely struggle in the year ahead. Investor interest in higher-yielding debt will persist. However, as central banks begin catching up with inflation in their policy moves, higher real rates could spark an eventual widening in credit spreads that dent returns for riskier debt.

In currencies, we look at the likelihood that the Fed will be more or less be forced down a path of hiking rates until something breaks down the road. The USD is likely to remain weak as long as the Fed’s perceived “terminal rate” remains anchored around 2 percent, and as long as the pace of the Fed’s rate increases is sufficiently sedate to avoid a liquidity panic. Elsewhere, we note that 2022 kicked off with extreme divergences in JPY weakness and CNY strength that haven’t been seen since China modified its exchange rate regime back in 2015, severely weakening the renminbi. With much of the world tightening while China seeks some form of domestic easing after crackdowns on the tech and property sectors, the divergence points to a softer renminbi.

Explore Saxo’s products

Steen Jakobsen

Chief Investment Officer

Saxo Bank

Topics: Quarterly Outlook

We need water. We need oxygen. We need win-win markets.

Thu, 20 Jan 2022 07:34:00 Z

Not a day has gone by in the history of humanity where we did not need each other. Capitalism is not an ideology – it is a system. And while it possesses the potential for humans creating win-win transactions among each other, then systems can be flawed. We need to mend and transform the system, but we cannot do it alone. Whether we call it humanistic capitalism or win-win markets, what matters is that we start to use the strength of the system to make the best possible impact on the most important thing we have: each other.

Sources referenced in the video:

“Capitalism and Its Impact on Global Living Standards”, Josh Swan, University of Birmingham
“The Cambridge History of Capitalism”, Cambridge University
“Exxon loses board seats to activist hedge fund in landmark climate vote”, Reuters

See all sources

Saxo Group

Topics: Money-matters

The plan to end fossil fuels gets a rain check

Thu, 02 Dec 2021 04:00:00 Z

Policymakers kick climate targets down the road and support fossil fuel investment to fight inflation and the risk of social unrest while rethinking the path to a low-carbon future.

Previous prediction | Next prediction

Realising the inflationary threat from surging commodities prices and the risk of an economic train wreck due to the unrealistic timeline for the green energy transition, policymakers kick climate targets down the road. They relax investment red tape for five years for oil production and ten years for natural gas production, to encourage producers to ensure adequate and reasonably priced supplies that bridge the gap from the energy present to the low-carbon energy future.

According to the IEA, the ambitious goal to reach net zero emissions by 2050 would require that the consumption of oil and natural gas decline 29 percent and 10 percent respectively by 2030, with further steep declines thereafter. Faced with this outlook, suppliers of these traditional energies have already begun scaling back exploration and production to such an extent that supply is already slipping relative to demand, raising prices for the energy source that still feeds the bulk of our primary energy.

This development has already jacked up prices and price volatility, not only for energy, but also for industrial metals, most of which are needed in greater quantities for the green transformation push. On top of this, surging energy prices have spiked prices for diesel and especially fertiliser, important farming costs that raise concerns about the production of key food crops.

One of the key restraints on the investment needed to maintain, much less expand, mining and energy production has been the lack of lending interest from investors and banks. Environmental, social and governance (ESG) criteria have become an increasingly popular way for investors and banks to allocate investment capital to companies.

Faced with rapidly rising commodity prices and an increasingly impossible road to carbon neutrality, policymakers make a surprise and controversial move in 2022 to temporarily relax environmental restrictions on new upstream crude oil and natural gas investments for five and ten years, respectively. The plan is sold as the only pragmatic way to bridge the reality of our energy-consuming present with the desired low-carbon future, while also limiting the risk of social unrest caused by rising food and energy prices.

Market impact: The iShares Stoxx EU 600 Oil & Gas ETF (Ticker: EXH1:xetr) surges 50 percent as the whole energy sector gets a new lease on life

See next 2022 prediction:
Facebook faceplants on youth exodus

Ole Hansen

Head of Commodity Strategy

Saxo Bank

Topics: Outrageous Predictions Row 1 OP 2022

Facebook faceplants on youth exodus

Thu, 02 Dec 2021 03:45:00 Z

The young abandon Facebook's platforms in protest against their mining of personal information for profit; the attempt by Facebook parent Meta to reel them back in with the Metaverse stumbles.

Previous prediction | Next prediction

Back in 2012, 94 percent of teens had a Facebook account, while surveys suggest that today only 27 percent of adolescents have an account. Facebook has gone from being a vibrant hub of young people, to a platform for older “boomers” as young people would say. Young people are increasingly turned off by Facebook’s algorithms turning their social media experiences into that of homogenous feedback loops of identical content, or even worse, hateful and disinforming content. Facebook’s own research suggests that teens spend 2 to 3 times longer on TikTok than on Instagram (which is Facebook’s youngest social media asset), and that Snapchat is the preferred way to communicate with friends.

In many ways, Facebook is suddenly in the midst of a cultural war between young people under 40 and adults over 40, with young people seeing Facebook representing the evil boomer generation of fake news and greedy corporations. Facebook was like the only meaningful cigarette brand and suddenly many new brands are joining the marketplace. These newcomers have a cooler style and a different take on data privacy and how information is controlled, without being minted in algorithms that serve highly individualised advertisement messages.

A new company name (Facebook is now called Meta) and brand identity to separate and shield Instagram (its most valuable current asset), together with creating a new product tailored towards young people, is the exact same playbook tobacco companies have used for years. But in 2022, investors will realise that Meta is rapidly losing the young generation and thus the future potential and profitability of the company. In a desperate move, Meta tries to acquire Snapchat or TikTok while throwing billions of dollars into building the creepy Metaverse, which is aimed at surveilling users more directly than ever before and getting young people back into Meta’s universe of social media platforms, in the perceived wisdom that being a first mover is always best in technology. The plan struggles to take off as the young generation fails to sign up.

Market impact: Facebook parent company Meta struggles, down 30 percent versus the broader market and is urged to spin off its components as separate entities, shattering Zuckerberg’s monopolistic dreams.

See next 2022 prediction:
The US mid-term election brings constitutional crisis

Peter Garnry

Chief Investment Strategist

Saxo Bank

Topics: Outrageous Predictions Row 1 OP 2022

The US mid-term election brings constitutional crisis

Thu, 02 Dec 2021 03:35:00 Z

The US mid-term election sees a stand-off over the certification of close Senate and/or House election results, leading to a scenario where the 118th Congress is unable to sit on schedule in early 2023.

Previous prediction | Next prediction

The chaotic 2020 US Presidential Election was a scary moment for many US institutions. The sitting president Donald J. Trump initially refused to conceded defeat in the election and complained that the election was stolen, a claim that was never seriously challenged in a court of law but one which had widespread sympathy among the Trump base. A crowd of hard-core believers in the stolen election conspiracy was encouraged by the President’s rhetoric to a sufficient degree to storm Capitol Hill and “stop the steal”, i.e., to prevent the election result from being made official on January 6, 2021, in a scene unprecedented in US history.

Prior to this, and then again later in the hotly contested Senate run-off elections in Georgia, dedicated election officials—many of them Republican—were doing their duty to tally the real results while risking their life amidst threats—even death threats—from extremists. In 2022, the Republicans ensure that no such traditional duty-bound officials are in the “wrong” place, with all election-related positions filled by toe-the-line partisans ready to do anything to tilt the results to suppressing voter turnout. The unpopular and tone-deaf Democrats, meanwhile, wage an ineffective campaign of fearmongering that fails to gin up a popular brushback against the response as they are also not trusted due to their progressive cultural positions, a better-than-thou attitude to the masses, and incoherent support of populist causes while key Democrats are clearly in the pockets of lobbyists.

In the wake of the 2022 election, a handful of key Senate and House races come down to the wire and one or both sides move against certifying the vote, making it impossible for the new Congress to form and sit on its scheduled first day of January 3, 2023. Joe Biden rules by decree and US democracy is suspended as even Democrats also dig in against the Supreme Court that was tilted heavily by Trump. Indeed, as 2023 gets underway the stand-off sees a full-blown constitutional crisis stretching over the horizon.

Market impact: extreme volatility in US assets, as US treasury yields rise and the USD drops on hedging against the existential crisis in the world’s largest economy and issuer of the world’s reserve currency of choice.

See next 2022 prediction:
US inflation reaches above 15% on wage-price spiral

John J. Hardy

Global Head of Macro Strategy

Saxo Bank

Topics: Outrageous Predictions Row 2 OP 2021

US inflation reaches above 15% on wage-price spiral

Thu, 02 Dec 2021 03:25:00 Z

By the fourth quarter of 2022, US CPI inflation reaches an annualized 15% as companies bid up wages in an effort to find willing and qualified workers, triggering a wage-price spiral unlike anything seen since the 1970's.

Previous prediction | Next prediction

At the end of the 1960s, the US Federal Reserve and the Fed chair then, McChesney Martin, misjudged how hot they could run the US labour market without fanning inflation. The miscue paved the way for inflation expectations getting out of control and a massive wage-price spiral the following decade. The official US CPI reached a peak at 11.8% in February 1975. It wasn’t until the recession of 1980-82 and brutal policy rate increases to levels as high as 20% that inflation was finally killed.

In 2022, the Federal Reserve and Fed chair Jerome Powell repeats the same mistake all over again as the post-Covid outbreak economy and especially the labour market are severely supply constrained, making a mockery of the Fed’s traditional models. Powell believes millions of Americans will return to work and fill some of the 10.4 million open job positions as Covid-19 fades. But this is plain wrong. Some have retired early due to the crisis and thus have permanently left the US workforce. The Federal Reserve Bank of St. Louis estimates the exodus of older workers to be about 3 million people. Others aren’t returning to poorly paid jobs after seeing huge handouts during the pandemic and seem to be waiting for better jobs and pay.

The big difference between today and yesterday is that the pandemic has fuelled a great awakening of workers. Across sectors and income classes they realise they are now more empowered than ever. They demand a better experience: better job conditions, higher wages, more flexibility and a sense of purpose from work. Coupled with persistent inflationary pressures coming from the production side, the energy crisis and labour shortage, this results in unprecedented broad-based double-digit annualised wage increases by Q4. As a consequence, US inflation reaches an annualised pace above 15% before the start of 2023, for the first time since WWII. This prompts the Federal Reserve into a too-little, too-late move to tighten monetary policy faster in a desperate effort to tame inflation. But the central bank has lost credibility; it will take time to regain it.

Market impact: extreme volatility in US equity and credit markets. The JNK high-yield ETF falls as much as 20% and the VIXM mid-curve volatility ETF soars as much as 70%.

See next 2022 prediction:
EU Superfund for climate, energy and defence announced, to be funded by private pensions

Christopher Dembik

Head of Macroeconomic Research

Saxo Bank

Topics: Outrageous Predictions Row 2 OP 2021

EU Superfund for climate, energy and defence announced, to be funded by private pensions

Thu, 02 Dec 2021 03:15:00 Z

To defend against the rise of populism, deepen the commitment to slowing climate change, and defend its borders as the US security umbrella recedes, the EU launches a bold $3 trillion Superfund to be funded by pension allocations rather than new taxes.

Previous prediction | Next prediction

The security umbrella provided by the US during the Cold War and afterwards over much of Eastern Europe is rapidly fading and threatens to fail entirely in the years ahead as the US looks east at far more serious economic and military rivals. Signs of this were already clear with the popular and withering attacks on NATO allies by former president Donald Trump and his demand for them to pay more. Then the AUKUS submarine deal stiffed France’s attempt to sell new submarines to Australia, as post-Brexit UK, Australia and the US moved into a new security arrangement that left a very cool feeling down the back of continental Western Europe and the EU.

The EU knows it needs to move fast on all fronts to bolster its defences and is also looking for a way to jump-start flagging economies buffeted by the energy and power crisis of 2021-22. French President Macron, backed by Italian Prime Minister Draghi moving to stave off Italy’s own rise of the populists, rolls out a vision for an “EU Superfund” that will address the three-fold priorities of defence, climate and the related clean energy transition. Given the EU’s aging population and heavy tax burdens, policymakers know that it will be impossible to finance the Superfund with higher taxes on incomes or other traditional tax revenues. Instead, France has a light-bulb moment as it seeks to overhaul its pension system and looks at Europe’s enormous pensions. It decides that all pensions for all workers above the age of 40 must allocate a progressively larger portion of their pension assets into Superfund bonds as they age. This allows new levels of fiscal stimulus in the EU even with the sleight-of-hand trick of hiding the spending in inflation and negative real returns on low-yielding Superfund bonds that are actually EU bonds in disguise. At the same the younger generation enjoys a stronger job market and less unfair tax burdens as the system proves such a success that income taxes are lowered progressively.

Market impact: Bond yields harmonise across Europe, leading to German Bunds underperforming. EU defence, construction and new energy companies are some of the best performers.

See next 2022 prediction:
Women’s Reddit Army takes on the corporate patriarchy

Christopher Dembik

Head of Macroeconomic Research

Saxo Bank

Topics: Outrageous Predictions Row 2 OP 2021

Women’s Reddit Army takes on the corporate patriarchy

Thu, 02 Dec 2021 03:05:00 Z

Mimicking the meme stock Reddit Army tactics of 2020-21, a group of women traders launch a coordinated assault on companies with weak records on gender equality, leading to huge swings in equity prices for targeted companies.

Previous prediction | Next prediction

Saving and investing has become a crucial topic among female communities. Many realise that because women’s life expectancy is longer, they need more long-term savings. However, they might have missed the opportunity to invest in the longest bull market in history due to the wage gap. On average, women earn 20% less than men in the same positions, thus have less disposable income to invest. Making things worse, the Covid crisis aggravated the gender inequality crisis, as it was disproportionately women who left their jobs to take care of children during the lockdowns. Because of the pandemic, it will now take 135.6 years to close the gender pay gap, versus 99.5 years before Covid, according to the World Economic Forum.

Women are not willing to wait any longer. Tired of the lack of progress, 2022 sees a massive grass-roots effort based on social media platforms to force companies that break civil rights laws to address unfair and sexist, racist, ageist and ableist practices. Although women have been struggling with lower salaries they have higher saving rates than men. Those savings will now come in handy as they decide to take the situation into their own hands and throw their considerable influence around in a #metoo movement in financial markets.

In contrast to the often-nihilistic original Reddit Army, the Women’s Reddit Army will be more sophisticated, with women traders coordinating a long squeeze by shorting stocks of selected patriarch companies. At the same time, they will direct funds to companies with the best metrics on female representation in middle management and among executives. Instead of condemning the development, politicians worldwide welcome and support their cause, putting even more pressure on companies with outdated patriarchal attitudes, poor gender equality in pay, and under-representation of women on boards and in management to address the errors of their ways.

Market impact: The movement gets real results as the broader market catches on to the theme and joins in, forcing targeted company prices sharply lower, which sees companies scrambling to change their ways. It marks the beginning of a gender parity renaissance in markets.

See next 2022 prediction:
India joins the Gulf Cooperation Council as a non-voting member

Althea Spinozzi

Head of Fixed Income Strategy

Saxo Bank

Topics: Outrageous Predictions Row 1 OP 2022

India joins the Gulf Cooperation Council as a non-voting member

Thu, 02 Dec 2021 03:00:00 Z

The world's geopolitical alliances will lurch into a phase of drastic realignment as we have an ugly cocktail of new deglobalising geopolitics and much higher energy prices.

Previous prediction | Next prediction

Countries reliant on imports for the majority of their energy inputs in a rapidly deglobalising world will need to move fast to strategically reorientate strategic alliances and secure long-term energy supplies. One such alliance could involve India, with its mighty technology sector, joining the Gulf Cooperation Council (GCC) as non-voting member, or in some sort of free trade zone. This alliance would see a reduction in India’s energy insecurity as it secures long-term import commitments. On the other hand, India’s incredibly strong technology platform and deepening capital markets could attract the excess savings generated in the GCC region, through lower friction access.

There is ample history linking these two parties. Many Indian companies are de facto running out of GCC member countries, and likewise India is seen as a “must-have” investment destination, not only for Middle East investors, but also globally as the world becomes far more multipolar, with the US, China and EU increasingly pursuing independent agendas and the rest of the world seeking to keep as many options open as possible.

Historically there has been an attempt already to change the GCC mandate of the regional, intergovernmental political and economic union to a more formal Gulf Union in 2011. We see new alliances being formed globally, all with a view to avoiding too close a commitment to either China or the US.

Interregional trading zones will secure “closer to home” production and investment, combined with the security of reliable supplies from India’s point of view, and a reliable destination market from the GCC’s point of view. The alliance helps lay the groundwork for the GCC countries to plan for their future beyond oil and gas and for India to accelerate its development via huge new investments in infrastructure and improvements in agricultural productivity together with fossil fuel imports, bridging the way to a post-carbon longer-term future.

Market impact: The Indian rupee proves far more resilient than its EM peers in a volatile year for markets. The bubbly Indian stock market corrects with other equity markets in early 2022, but proves a strong relative performer from the intra-year lows.

See next 2022 prediction:
Spotify disrupted due to NFT-based digital rights platform

Steen Jakobsen

Chief Investment Officer

Saxo Bank

Topics: Outrageous Predictions Row 3 OP 2022

Spotify disrupted due to NFT-based digital rights platform

Thu, 02 Dec 2021 02:50:00 Z

Musicians are ready for change as the current music streaming paradigm means that labels and streaming platforms capture 75-95 percent of revenue paid for listening to streamed music. In 2022, new blockchain-based technology will help them grab back their fair share of industry revenues.

Previous prediction | Next prediction

Non-fungible tokens, or NFTs, are unique digital assets, the ownership of which can be established and stored on a digital ledger via blockchain tech. And 2021 was the year of the rise of NFTs as out of nowhere they gained traction. Investors wildly bid up things like uniquely generated character images from CryptoPunks and illustrations by the former unknown artist Beeple, one of which sold for a record $69M in March.

While the early days of NFTs have looked chaotic and dangerous for asset buyers, the outlook is bright for NFT technology. Not only does an NFT-based platform offer a new way to verify the ownership of rights, but also a way to distribute rights without intermediaries, i.e., a completely decentralised system obviating the need for a centralised platform.

The use case for NFTs could prove particularly compelling in the next step for the technology for content generators in the music industry as musicians feel unfairly treated by the revenue sharing models of the current streaming platforms like Spotify and Apple Music. These models don’t guide individual subscribers’ fees to the actual music an individual subscriber listens to. Rather, all subscription fee revenues are aggregated and distributed based on every artist’s share of total streams. In addition, the platforms take a substantial cut, which together with the cut paid to labels is some 75 percent or more of the total revenue.

But by leveraging NFTs, more specifically via “smart-contract” blockchains, artists could distribute music directly to listeners without centralised intermediaries taking a cut, while tracking their income in real-time—even getting paid in real-time—with listeners enjoying the knowledge that the money they are paying is going straight to the artist.

In 2022, an NFT-based service takes hold and begins offering music from notable stars – perhaps the likes of Katy Perry, The Chainsmokers and Jason Derulo, all of whom have recently backed an effort to create a new blockchain-powered streaming platform. Other well-known artists begin pulling their music from the now “traditional” streaming platforms, which suddenly find themselves terminally disrupted. Investors see the eventual writing on the wall for podcasts, movies and other forms of digitisable contents as well.

Market impact: Investors recognise that Spotify’s future is bleak, sending its shares down 33 percent in 2022.

See next 2022 prediction:
New hypersonic tech drives space race and new cold war

Mads Eberhardt

Cryptocurrency Analyst

Saxo Bank

Topics: Outrageous Predictions Row 3 OP 2022

New hypersonic tech drives space race and new cold war

Thu, 02 Dec 2021 02:40:00 Z

The latest hypersonic missile tests are driving a widening sense of insecurity as this tech renders legacy conventional and even nuclear military hardware obsolete. In 2022 a massive hypersonic arms race develops among major militaries as no country wants to feel left behind.

Previous prediction | Next prediction

In the summer of 2021, China tested a hypersonic vehicle that could enter low orbit and later re-enter the atmosphere to then cruise toward its target. The test was said to shock top US military officials, with chairman of the Joint Chiefs of Staff Mark Milley even willing to say that this was close to a “Sputnik moment” for the US. That was a reference back to the successful Soviet launch of the Sputnik satellite in 1957, which served as a wakeup call to the US on superior Soviet rocketry and space capabilities, and an event that marked the beginning of the space race, the most iconic part of the US-Soviet cold war rivalry. In 2022, it is clear from funding priorities that hypersonics and space are the heart of a new phase of the deepening rivalry between the US and China on all fronts—economic and military. Other major powers with advanced military tech join in as well, likely including Russia, India, Israel and the EU.

Hypersonic capabilities represent a game-changing threat to the long-standing military strategic status quo, as the technology brings asymmetric new defensive and offensive capabilities that upset the two massive pillars of military strategy of recent decades. The first is the potential for devastating hypersonic tech defence against the conventional attack capabilities of long-range bombing aircraft, as well as the so-called “deep water” navy of ships that can bring the fight to any corner of the globe without refuelling. Billion-dollar surface ships risk proving sitting ducks without a chance to defend themselves against a hypersonic attack that arrives at multiples of the speed previously possible—perhaps as high as Mach 10. The second pillar of the old Cold War era was the principle of mutually assured destruction (MAD) in the event of nuclear war, under which it was pointless to launch a nuclear war as long as there was still time for the opponent to launch an equally destructive ICBM counterattack from land- and submarine-based ballistic missiles. But the speed and agility of hypersonic tech introduces the belief that superior defence could thwart an attack entirely and even allow for new first-strike capabilities.

Market impact: massive funding for companies like Raytheon that build hypersonic tech with space delivery capabilities and underperformance of “expensive conventional hardware” companies in the aircraft and ship-building side of the military hardware equation.

See next 2022 prediction:
Medical breakthrough extends average life expectancy 25 years

John J. Hardy

Global Head of Macro Strategy

Saxo Bank

Topics: Outrageous Predictions Row 3 OP 2022

Medical breakthrough extends average life expectancy 25 years

Thu, 02 Dec 2021 02:30:00 Z

Young forever, or for at least a lot longer. In 2022, a key breakthrough in biomedicine brings the prospect of extending productive adulthood and the average life expectancy by up to 25 years, prompting projected ethical, environmental and fiscal crises of epic proportions.

Previous prediction | Next prediction

In search of slowing the natural process of aging, researchers have been studying the processes at the centre of how we age from multiple angles and with a growing arsenal of advanced technologies, from therapeutics to “prime editing” at the DNA level. The year 2022 sees a major breakthrough from a multi-factor approach, as a cocktail of treatments is put together that tweaks cell-level processes in order to extend their life and thus the life of the organism composed of those cells. It’s not cheap, but it’s effective and has already been demonstrated on laboratory mice containing human DNA, extending their lives some 30% and more. The implication for humans is the possibility that average life expectancy can be extended by 25 years or more, and with it the incredible prospect in the future that age 80 will be the new 50. Not only that, but this future is open to older humans too as the new fountain of youth treatment can slow and even rejuvenate already old cells.

Not only do life expectancy improvements come via longer life, but also through reduction and even elimination of most human diseases—from heart disease to neuro-degenerative disorders—many of which are responsible for the decline in health and productivity as we age. This is made possible by the prime editing of DNA approach, which doesn’t rely on new cells via division but actually rewrites existing cells.

The prospect of a massive leap in human quality of life and life expectancy are huge wins for mankind, but bring an enormous ethical and financial quandary. Imagine that almost everyone can look forward to living to an average age of 115 and more healthily. What would this mean for private and government pensions, or even the ability or desire to retire? And what about the cost to the planet if it is set to support billions more people, not to mention whether or not there is enough food to go around? And then there is the ethical question of whether it is humane to not make the cocktail available to everyone. In short, how would our value systems, political systems and planet cope?

See next 2022 prediction:
The plan to end of fossil fuels gets a rain check

Steen Jakobsen

Chief Investment Officer

Saxo Bank

Topics: Outrageous Predictions Row 1 OP 2022

In a world of negative real rates, EM Asia is a beacon of hope

Tue, 05 Oct 2021 05:58:00 Z

It's time to take a step back from developed markets if you want to find positive yields

Inflation is no transitory joke …

Take it from someone who—unlike my peers—was originally in the transitory camp of inflation; after all, the tri-factor meta-trends of ever-lower US yields since the 1980s, deflationary forces of technology, and ageing demographics in most western and developed markets were goliath factors that have been running for decades.

Now it’s not so much that these meta-trends have been usurped overnight; it’s more the recognition of the fact that we could well be entering a medium inflationary regime which could run for years.

For context here is a table of recent inflationary prints across the globe (September 16, 2021)*:

*Worth noting that Australia and New Zealand CPIs are quarterly, unlike the default monthly figures for other countries. Sources are Saxo Bank and Bloomberg.

The fascinating thing you can see is that out of the major economies in the world, from both a DM and EM representation, the US is fourth in terms of having the highest inflation rate at 5.3%, but has a central bank rate of 0.0%—way lower than the +4.50% to +6.75% range across Russia, Brazil and Mexico.

If someone had told you in December 2019 that in 2 years’ time the US would be showing higher inflation than places like South Africa, Indonesia and India, alongside a central bank that had not hiked or tapered yet, they would have been laughed out of the room.

The other startling takeaway is the +3.2% to +3.8% range of inflation across the other DMs, with all of them having all-time low central bank rates. What is even more revealing of the inflection point, is when you compare the inflation and central bank rates pre-Covid (December 2019) and today (September 2021).

For instance, pre-Covid Norges bank’s rate was +1.50% with inflation running at +1.40%. Today inflation has more than doubled to +3.40%, while the Norges bank rate as of early September was sitting at 0.00%. It’s not hard to fathom a pathway where Norges bank returns to its +1.50% rate, if not higher, over the next 12 months.

Meanwhile in China, Indonesia and India, inflation has actually been falling from pre-Covid levels to the present. And in the case of China’s PBOC, they never cut rates during the Covid crisis.

Negative real rates reign supreme in developed markets …

Negative real rates seem to be a function of developed markets that have lost the ability to have true price discovery, and are instead influenced by synthetic pricing as a result of extraordinary credit growth. A key inflection point was seen in 1971 when Nixon took the US off the Gold Standard and with it, accountability. Also after the 2008 financial crisis, the predominant response from the US and most of the world was one of monetary policy expansion but fiscal policy restraint. Obama was a Democrat president and Congress was controlled by Republicans who, now being out of the White House, had found faith again in being fiscally conservative.

For additional context on the extent of this synthetic pricing that is prevalent in our markets, the Fed’s BS/GDP ratio grew from around 6% prior to the sub-prime 2008 crisis to a high of 26%, in measures that were supposed to be “temporary”. “Tapering” brought us back to a low of 18%, and then post-Covid we’ve seen that ratio spike to 38%. Now where could this number get to?

When Abenomics kicked off in the back end of 2012, the BoJ BS/GDP was around 28%. Today, less than 20 years later, it’s 133%, with no signs or indications of a reversal of policies to any kind of normalisation. The BoJ own the vast majority of the bond market in Japan and depending on whose data you trust, potentially up to 30% of equities. And this from the third biggest country that, unlike the US, is not even the global reserve currency of the world, with the deepest and most valuable equity, debt, real estate and intellectual property markets.

If we normalise the quarterly growth of the Fed Balance Sheet versus the S&P 500 from the end of 2007 to the end of August 2021, we can see that the Fed’s Balance Sheet grew by +935% versus the S&P 500’s +308%.

Source: Bloomberg and Saxo Group

The net result of all this liquidity in the system is developed markets that cannot reverse course back to a world of positive real rates. The political capital, will and courage is not there. Perhaps most alarming, the zeitgeist and the societal imbalances would just not stand for it. In the DMs we’ve just had the biggest wealth distribution from government balance sheets to its citizens and the vast majority are going to get used to this entitlement. And politicians being politicians, they will respond like monkeys, pushing the same button over and over all because it feels good and leads to their further entrenchment. The flawed incentives, vested interests of the elite, and lack of accountability and transparency from policymakers have DMs stuck in a vicious feedback loop that only compounds the house of cards that has been building since 2008.

Emerging markets are the only place to find positive real yields.

EM Asia is host to some of the biggest real rates yielding bond markets in the world. These include Indonesia (+4.5%), China (+2.1%), and Malaysia (+1.1%); contrast this with the negative rates to be found in the USA (-4.0%) and the Eurozone (-3.7%).

Source: Bloomberg and Saxo Group

Explore Saxo’s products

Kay Van-Petersen

Global Macro Strategist

Saxo Bank

Topics: Quarterly Outlook

The sad reality of the green transition

Tue, 05 Oct 2021 05:56:00 Z

It might do wonders for the planet, but will a carbon-free society translate into higher growth and GDP?

As hopes rise that the pandemic is almost over in the developed world, visions of a second “Roaring Twenties” to match last century’s post-pandemic decade have proliferated. In the Jazz Age of the 1920s, consumerism and mass culture took shape. Innovations emerged: automobile, radio, motion pictures and labour-saving electric appliances, for instance. It’s tempting to ask whether history will repeat itself. The automobile and the radio have been replaced by the green transformation as the major driver of change. But today’s secular stagnation will be tough to overcome. In our view there’s no sign at this stage that the worldwide transition to a carbon-free society will translate into higher productivity growth and higher GDP growth over the long term.

A circular relationship: It is known from economists and non-economists that productivity is a long-term determinant of return on capital and thereby of interest rates. Antonin Bergeaud, Gilbert Cette and Rémy Lecat showed that “interest rates are also a determinant of the minimum expected return from investment projects, and therefore of the productivity level required for such investments” (see here). To put it another way, the decline in real interest rates allowed weakly productive companies (including zombie companies) and projects to be profitable; this caused a slowdown in productivity. Bergeaud, Cette and Lecat state that the relationship between productivity growth and real interest rates is not unidirectional, but circular.

The natural disasters hitting the world in 2020 served as a wake-up call to governments and the private sector on the urgent need to tackle climate change and accelerate the transition to a carbon-free world. Companies have invested massively to reduce their carbon footprint. Governments have unleashed billions to stimulate investments in green energy. But there’s little sign it will lead to much higher average growth and productivity than before the pandemic. The prevalence of negative real interest rates is an indication that decarbonisation and sustainable investing is unlikely to improve productivity and thereby economic growth, at least in the short and medium term.

No technological breakthrough yet: One escape would be a technological breakthrough, but there’s still no sign of it. The digital revolution, which started at the end of the 1990s, has not stopped the decline in productivity. The green transition is only accompanied by a few concrete innovations. The sad reality of the green transition is that a large amount of the invested money goes to projects with little ability to change the face of the world. Many European countries have decided to exit nuclear power, mostly for ideological reasons. This is a risky political choice for the planet. Each time, it has resulted in higher reliance on more harmful energy sources, such as natural gas or coal. In Germany, CO2 emissions increased by 35 million tons per year, for instance. In Belgium, the decision to close two thirds of its nuclear power stations between 2022 and 2025 and to build gas power stations as a replacement will multiply CO2 emissions per kwh by 74. At the current level of technological development, renewable energies are not able to replace conventional energy sources. A distinction must be made between variable renewable energy (wind power and solar power) and controllable renewable energy (hydroelectricity and biomass). The first one is not useful in the energy mix towards a carbon-free world since it is not able to supply a steady supply of electricity. The second one must be an integral part of the energy mix. In recent years, governments have wasted a huge amount of money in wind and solar investments. But for most countries, these energy sources make little sense. The allocation of resources in the green transition is often misguided.

There are a few promising technologies but they are at the prototype stage. It will take several years, perhaps five to ten years, to reach large-scale industrial applications.

China has invested billions of dollars to build a thorium-fuelled nuclear reactor by 2030. Thorium is a weakly radioactive metallic chemical element discovered in 1829 in Norway. It has several advantages over uranium: 1) it is four times more abundant and can be found all over the planet; 2) it produces less volume of waste. 83% of this is neutralised in 10 years, and the other in 300 years; 3) it is safer. It solidifies quickly when it is exposed to open air, and it does not emit radioactive gas. Some European countries have also started research on thorium, but with smaller budgets.
Many countries are working on green hydrogen as a replacement for fossil hydrocarbons. Green hydrogen is an energy storage solution based on renewable energy. There are two pitfalls: one is a poor efficiency rate of 25% to 30%. This means that more than two-thirds of the renewable electricity produced at the start vanishes in the process; the other is high cost. Green hydrogen is four times more expensive than blue hydrogen, which is produced from fossil energy. This explains why the global production of green hydrogen is marginal—less than 5% of the total. It will require years of research and investment to improve the technology, hopefully.
We mentioned that variable renewable energy is of little use in the energy mix. But technological improvement could change the situation in the next five to ten years. Large industrial projects seek to address the problem of wind intermittence. Instead of increasing the number of offshore wind farms individually connected to national grids (which increases costs and reduces systemic efficiency), the Dutch electricity transmission operator TenneT promotes the idea of artificial islands in the North Sea serving as hubs to distribute electricity in an optimised way to neighbouring countries. This is a pilot project and will take years to be rolled out.

Big government: Industrials have fully understood the challenges of the energy transition. But the private sector will not be able to bear the cost alone. There is no historical example where such a change has been achieved other than through a form of large-scale political intervention, massive public investments, and central economic planning. The recovery plans adopted to exit the Covid-19 recession are a first step. More than a third of the French recovery plan is devoted to energy transition. In the United States, more than $8bn has been allocated to hydrogen production, mostly blue hydrogen, as part of the infrastructure plan—there is more to come. But if we want the green transition to be synonymous with higher productivity growth and higher GDP growth, we first need to make sure that resources are optimally allocated. This is not the case yet.

In our view, the negative real rates are an economic sign that the green transformation needs to find a different path from here. If anything, it does us the favour of pointing out that in order to solve the green deficit we need to find productivity and a model which allocates higher marginal productivity, and not a political narrative of a change which is nothing but real change.

Source: Macrobond, Saxo Group research and Strategy

Explore Saxo’s products

Christopher Dembik

Head of Macroeconomic Research

Saxo Bank

Topics: Quarterly Outlook

The mysterious dissonance in equities

Tue, 05 Oct 2021 05:54:00 Z

US equity valuations are at all-time highs - but not without reason. Is this a bubble that won't burst?

Equities have entered a new paradigm as a function of the pandemic with valuations and real yields reaching levels we have not seen in recent history. Profit margins are at all-time highs in the US while commodities are close to new all-time highs. At the same time the UN’s food price index is already flirting with the highest levels in six decades and Europe is at the cusp of an energy shock. The delta variant has caused global growth to slow and added more bottlenecks across manufacturing hubs in Asia. For now equities are shrugging it all off, with the second-longest rally with a drawdown of 5% or less since 1999.

Meanwhile capital expenditure in the mining and energy sectors is historically low, the developed world is doing an accelerated decarbonisation, excessive ESG focus is increasing costs for companies, and global manufacturing is being reconfigured creating a less smooth supply side in the global economy. Rewind the clock 10 years and nobody would have thought these factors could coincide, but now they are. The big question is whether it is a sustainable equilibrium, or we are at the turning point of a bigger reset in financial markets?

US equity valuations are flashing red alert—or are they?

Global equity valuations—especially US equity valuations—are at absolute highs measured across a wide range of valuation metrics. The current valuation level is associated historically with a very low probability of a positive real rate return over the next 10 years. In isolation it looks like another terrible inflated bubble in equities, but unlike the dot com bubble where the alternative was high real yields this time investors are offered no meaningful yield in bonds; in essence we have maxed out the wealth effect. It seems investors are willing to take a bet that, even at these elevated valuations, the future return will still be better than that of the bond alternatives.

Source: Bloomberg and Saxo Group

While equity valuations look dangerously high in absolute terms the flipside of high valuations are historically low yields. According to estimates of the US equity risk premium (what equities are expected to deliver in excess returns over the risk-free rate) by finance professor Aswath Damodaran, the US equity risk premium is currently 4.6% compared to only 2% in 1999, the lowest observed equity risk premium in the US since 1960. Remember, that an estimated equity risk premium of 4.6% could turn out to be zero return after inflation if we get a new period of sustained higher inflation.

Equity duration has risen dramatically over the past 10 years

With bond yields at historical lows the natural question is what will happen to equities if they start rising again? For bonds, the concept of duration is a well-known concept and can be measured quite precisely. One percentage point move in the US 10-year yield will approximately lead to a 7% decline for the 7-10Y Treasury bonds. Equity duration is a different animal.

We are using the methods of approximation described in the paper Implied Equity Duration: A New Measure of Equity Risk (Dechow et al., 2002). In addition we are adjusting earnings and book value for R&D expenses, which we capitalise and amortise over three years. The adjustment for R&D makes Nasdaq 100 companies look less expensive as they spend 7.9% of revenue on R&D, compared to only 3.7% for the S&P 500 companies; R&D is also expensed immediately under the current accounting rules. Instead of a fixed cost of equity as used in Dechow et al., we use a dynamic cost of equity which is a function of the current interest rate level.

As our estimates for equity duration show, equities have in theory become much more sensitive to interest rates in recent times, compared to 10 and 20 years ago. We see clearly that the interest rate sensitivity explodes after the Great Financial Crisis, and as interest rates went negative in Germany the implied equity duration has risen dramatically in Europe. Simultaneously, global debt has increased to 356% of GDP and house prices have hit new records. Everywhere you look, everything has become sensitive to where interest rates go, and itself that limits how high interest rates can go to cause severe stress on the system.

Source: Bloomberg and Saxo Group

Equity duration is not an exact measurement as it is with fixed income due to the lack of a finite period of cash flows. Added to that, all parameters in estimating equity durations come with great uncertainty. Another way to look at equity duration is to plot P/E levels on the MSCI USA Index vs US real yields (the US 10-year yield minus the 10-year break-even yield). The current valuation level measured on P/E has not been seen since the dot com bubble, but unlike today’s negative real yields, back then real yields were above 4%. Can negative real yields explain all of the rise in equity valuations?

Back in 2012 and early 2013, before the famous Bernanke tapering talk, real yields were almost as negative as today, but equity valuations were half of their current level. The main differences between today and 2012 are a more mature equity rally which has bolstered investor confidence, along with the recent post-pandemic rebound due to excess fiscal stimulus. These factors may have caused investors to extrapolate growth at a high level, justifying the high equity valuations. More retail investors are also participating these days, chasing returns and narratives, and the quasi-monopolies in US technology have also seen their profits accelerate massively since 2012.

What the plot shows is that real yields may not have to move much before, under the right conditions, US equities will trade at much lower equity valuations. The observed variance in valuations at negative real yields is 2 to 3 times larger than for all other quantiles of real yields since 1998. In other words, the assumed risks for investors are high. A prediction from equity duration theory is that volatility and idiosyncratic risk rise with equity duration. In other words, we expect volatility to go up from here and especially for the lofty equity valuation segment in technology.

Source: Bloomberg and Saxo Group

So which type of companies are most sensitive to rising interest rates? Theory predicts that companies with low return on equity (or even negative), high growth rates, or high valuations have the highest equity duration. Our Bubble stocks equity theme basket is clearly the subset of equities we expect to have the highest sensitivity to interest rates, combined with private equity firms, real estate and high valuation IPOs. While equity markets are calm, growth investors should start now to balance their portfolios with defensive and low-duration equities such as commodities and high-quality companies with high return on equity and below-average equity valuations.

Exceptional US companies

While US equity valuations are high they are not high without reason. One factor is the low real yields, but that could also be said of Europe and here we do not observe the same equity valuations. Part of the explanation is that US companies have a significantly higher return on equity, currently at 17.1% compared to 11.3% in Europe, and as we have described in research notes, US companies on average have more stable earnings and grow faster due to their higher share of digital companies in public markets.

The high return on equity for US companies predicts that even with higher valuation levels today, US equities could outperform European equities. Let’s say that US and European companies deliver the current return on equity each year over the next five years: even if US equities today are 25% more expensive on price-to-book and revert to European equity valuation levels after five years, US equities would have generated 29% more return over that period. So it should be clear for investors that you need very good arguments for not still being overweight on US equities.

Equity markets	ROE (%)
US	17.1
Europe	11.3
UK	11.7
Japan	9.2

Source: Bloomberg and Saxo Group

Inflation and the margin squeeze

The biggest risk to economies, financial markets and equities is inflation. It holds the key to upset the entire structure in place since 2008. Policies are being implemented globally as if we have a demand shock, but we are currently facing a supply side shock due to the pandemic, lack of investments in the physical world, and an accelerated decarbonisation through electrification and renewable energy. These forces are putting enormous pressure on commodity prices and our view is that the green transformation combined with the current policy trajectory will sow the seeds of a commodity super-cycle that will last for a decade.

In addition policies in the developed world and China will increasingly address inequality to avoid social unrest, which will mean higher taxes on corporates and capital, supporting higher wage growth for low-income individuals. The combined effect could cause inflation to run higher for longer and above the 2.3% average in the US since late 1991. One conundrum is that since the world has become very sensitive to interest rates, what will central banks do if inflation remains above average for a long time? Either they raise rates and cause pain to our indebted economy, or they stay put and let real yields go even more negative. Could equities enter an outright melt up scenario under these conditions? It is not unthinkable.

Source: Bloomberg and Saxo Group

The flipside of rising commodities and wage growth is profit margins in the corporate sector. S&P 500 has just hit its highest profit margin since 1990 and market forces, if not broken, should begin to cause a mean reversion in profit margins. This will act as a drag on earnings growth unless nominal growth remains high, but for that to happen more fiscal stimulus is needed and the pandemic needs to end.

Equities are priced for perfection and a world that will not change, extending the trends for the past 10 years. But if this time is different, then equity investors are about to undergo outcomes none have seen in many decades. We will end our equity outlook with the words that, while equities are expensive, there are no attractive alternatives for the long-term investor. Inflation and interest rates are the real risks now for equity investors and we recommend that equity portfolios think about equity duration and lower it now while equity markets are calm.

Explore equities at Saxo

Peter Garnry

Chief Investment Strategist

Saxo Bank

Topics: Quarterly Outlook

The US dollar could make life miserable for the bears in Q4 before rolling over

Tue, 05 Oct 2021 05:52:00 Z

If the USD didn't weaken in Q3 when conditions were perfect, don't expect it to in Q4. But what about 2022?

Currencies were quiet in aggregate in Q3—certainly the majors—but there were a number of entertaining single stories such as the weak AUD, and the strong NZD and NOK. It’s perhaps too easy to suggest that volatility is set to rise, but if that is what we do see, it would mark the first rise in volatility since the pre-US election quarter last year. Given uncertainties in the US fiscal outlook, the Fed withdrawing accommodation, EU political uncertainties, spiking commodity prices and a tectonic shift in China’s policy focus, the energy level should be set to pick up sharply in the quarter ahead.

USD: The last quarter showed that the greenback is a tough currency to weaken.

Up front, please note that this outlook, while released after the September 22 FOMC meeting, was written before that meeting took place. Given the scale of the reaction to the June FOMC meeting which jolted the USD significantly, some of the anticipated moves in the US dollar could prove significantly frontloaded (even in the rear-view mirror relative to the release date!) or backloaded, depending on whether the Fed surprises us with a more hawkish September meeting (actually my anticipation) or prefers to wait for the November meeting to play catchup on bringing forward its intent to tighten relative to where market expectations were heading into Q4.

In Q4 the US dollar may fail to continue the “tick-tock” pattern we otherwise saw in the USD this year—strong in Q1, weak in Q2, strongish in Q3, etc. The spectacularly complacent liquidity and risk sentiment conditions in the Q3 failed to see the US dollar weaker, in part aided by a mostly very dovish Fed after the one-off June FOMC semi-shock. If almost ideal conditions for USD weakness were insufficient to bring down the greenback during the last quarter, a modest brushback of an upside breakout aside, how are we supposed to drum up an outlook for a significantly weaker US dollar when the backdrop in Q4 could prove far less supportive?

In Q3, peak dovishness for the Fed relative to the rest of the world in Q3 came with the late August Jackson Hole speech from Fed Chair Powell, who stoutly defended the Fed’s belief that inflation will prove transitory, and that further progress would be needed on the employment side of the Fed mandate before the Fed would even consider lift-off. As an aside, almost zero coverage was given to the presentation of an intriguing paper at that same Jackson Hole conference, which argued that inequality was the chief driver of a very low r-star (the neutral level for interest rate policy), not demographics. Of course, getting the Fed to admit that its policies aggravate inequality has thus far proven an insurmountable task, but it could just be a sign.

Shifting to Q4, we expect the market to read the Fed differently as Powell and company are set to continue the direction of change toward withdrawal of accommodation that was established, however gently, at the June FOMC meeting. Payrolls should see significant gains on the confluence of a screaming demand for labour and job openings at record highs, with the expiry of pandemic job benefits that stopped for millions in early September. Our sincere hope is that the Delta variant outbreak that clearly impacted sentiment in Q3 will also wane but if anything, our confidence in understanding how long the virus effects will linger has declined with every wave and surprise the virus has thrown our way.

Other factors could also support a firmer US dollar in Q4 relative to the backdrop we have seen over the previous two quarters. The US treasury has wound down its prodigious general account from over $1.5 trillion to near $200 billion from Q1 and Q3. At the same time the Fed brought well north of a trillion of extra liquidity in Q2 and Q3 that overwhelmed even the Fed’s own QE programme, requiring the Fed to mop up the excess with a ballooning reverse repo facility that represents a “stored QE” of some 8 to 9 months at the time of writing. Further out, the USD will find headwinds as the fiscal impulse of the pandemic response will have fully faded as we roll into the New Year and won’t be fully replaced next year, even if the $3.5 trillion social spending programme that requires across the board approval from the 1-vote majority enjoyed by Democrats somehow sees the light of day. Next year will show that the Fed can’t ever really taper purchases and the US economic outlook will be losing altitude beginning as early as late this year. In the meantime, one-off factors like rising yields on expanded treasury issuance after a debt ceiling resolution, combined with reduced liquidity from Fed tapering and more volatile asset markets, could make the path more than a little difficult for USD bears. However, the quarter could see the greenback posting a major cyclical low setting up for a weak 2022 and beyond.

EUR: Backloaded strength in Q4?

In the Q3 outlook for the euro, I asked the rhetorical question about whether we could “fast forward to Q4 please?” It felt like the next potentially critical pivot point for Europe and the euro would be the outcome of the German election and what coalition eventually emerges. FX traders who were not sellers of volatility certainly agreed that Q3 was one to fast forward through as price action in EURUSD was highly rangebound and the 3-month EURUSD implied volatility dropped into the extreme depths below 5%. This is an area only ever visited briefly in 2007 and 2014, apart from a more extended bout of low volatility anticipation in late 2019 and early 2020 before the pandemic outbreak exploded the price action out of a compressed range. Early Q4 could see volatility picking up around the September 26 German election and what will inevitably prove a centre-left coalition of SPD/Greens and…who? Supposedly, we’re meant to expect a “traffic light” coalition that includes the surging liberal FDP party. It’s an intriguing possibility that comes with many pre-declared strings attached from the FDP if they are asked to join a government coalition, including a more supply-side policy focus of tax cuts to stimulate the economy. Still, if the parties manage to put together a coalition, it could end up bringing a significant boost to the German and EU outlook via an increase to both supply-side and fiscal-side stimulus. This could offer the euro increasing traction by mid-to-late Q4. Stay tuned, as Q4 could bring a significant launch point from local lows for a significant EURUSD rally.

Chart: EURUSD vs. EURUSD six-month volatility

We see the potential for a solid pickup in volatility in EURUSD in Q3, potentially to the downside first before a sustainable rally sets in by late Q4. With implied volatilities near historic lows, value may be found in long-dated options strategies for establishing a view during Q4 – possibly from the 1.1500 area or lower if a shift in US yields drive a solid USD revival. Further out, we see the euro significantly higher. (Source: Bloomberg)

Source: Bloomberg

JPY and CHF: Looking lower as US yields poised for a breakout higher

Pretty straightforward here. Q4 will bring a snap Japan election with a mandate to “do something” on the fiscal side. Ruling LDP leader candidates are falling all over each other in promising maximum fiscal stimulus, with the BoJ ever ready to toss fresh QE logs on the monetary fire. Also, with our bullish commodities outlook, we could see the JPY under further pressure on Japan’s current account balance heading in the wrong direction. The Swiss franc should also lose out on higher yields and a sense of EU fiscal impulse on the way in 2022.

GBP: Increasing stability in the Brexit lie of the land helps, but only so much.

UK policymakers seem to have identified the task from here as one of bringing a credible fiscal belt tightening without crashing the economy, remembering that austerity under Osbourne, together with the 2015 immigration crisis, helped bring about the populist-led Leave vote back in 2016 in the first place. A BoE solidly wary on inflation risks has provided a modicum of support for sterling in the meantime, and the BoE is priced to achieve lift-off by mid-2022, ahead of where the market sees the Fed starting its hike range. A rapidly stabilising détente on trade issues with the EU should help in the background and keep much-needed investment inflows offsetting the mind-numbing trade deficit that will keep a fairly low ceiling on GBP’s potential upside.

AUD and NZD: Maximum divergence point to be reached in Q4?

One of the more remarkable themes in Q4 was the relative policy outlook divergence in the Antipodes, with the RBA determined to wait out its declared 2024 policy horizon for the first rate hike. That stance was “supported” by the failure of Australia’s zero-tolerance policy, leaving much of Down Under in lockdown and shifting to a rapid vaccination rollout policy that should be complete before the end of the year. In New Zealand meanwhile, the RBNZ was in a rush away from accommodation on the embarrassment of high inflation and record housing gains from ZIRP and QE at a time at a time of a ruling left-populist government that had made affordable housing a policy cornerstone. Q3 saw RBNZ Governor Orr and company fully abandoning QE and talking up rate hikes, with rate expectations from the RBNZ notching new highs late in Q3 even as the NZ commitment to its own zero Covid tolerance policy didn’t entirely prevent a fresh outbreak of cases in Q3. Two-year AU-NZ rate spreads are nearing their modern wide levels well south of -100 bps and we are likely to see some mean reversion in favour of the AUD in Q4 as the market anticipates Australia’s outlook quickly normalising relative to the rest of the world in Q1. We suspect conditions will make a mockery of the RBA’s policy guidance on no hikes until 2024, much as the RBNZ was forced quickly into a retreat.

Chart: AUDNZD and Australia-New Zealand 2-year yield spread

As noted in the text, the spread between short-term Australian and New Zealand yields has widened to near-historic extremes in Q3 as the RBNZ has exited QE and is hankering to hike rates, while the RBA seems convinced it will be able to sit on its hands with no rate hikes until 2024. We suspect this divergence in rates has reached or will soon reach an extreme as Australia will likely aggressively open up by late Q4 or early Q1 at the latest, helping AUDNZD find a low and begin to mean revert within the 1.000-1.1500 long-term range. (Source Bloomberg)

Source: Bloomberg

CAD: Like it on commodities theme, looking for ways to get long in Q4

An election in late Q3 doesn’t appear to have much at stake in policy terms, as a minority government looks inevitable after Trudeau’s gambit to ride popularity in the polls to a snap election victory backfired badly. We like CAD on its commodity-linked potential, even if housing hangover concerns are a long-term worry. Given fears of a USD upside potential noted above, we look for valued in CAD in USDCAD levels near and above 1.3000 as the pair overshot to the downside in Q2.

NOK and SEK: Interesting twist for NOK more than SEK

NOK has gone from strength to strength in Q3 as oil prices remained high and natural gas prices surged to unprecedented levels, with the latter taking over the former in terms of import revenue for Norway. If Russia can get the NordStream2 pipeline online in a big way in Q4, this could crush natural gas prices back to historic ranges and take the NOK outlook down a couple of notches, even if we remain constructive on the NOK outlook. We like SEK as well and would look to fade the dips (SEK is one of the most risk-sensitive currencies) on the assumption that the EU fiscal and inflation outlook is set to surge next year. SEK often trades with high beta to EUR direction.

EM currencies: CNH too strong given capital market uncertainty

Helmets on for more volatility across the EM complex after conditions were extremely supportive over the last couple of quarters, with falling credit spreads and a general easing of market volatility. Specific commodity-linked stories may do well, although the last couple of quarters have shown us that politics and policy can disrupt. One extremely significant driver of uncertainty is the massive policy shift in China which, broadly speaking, looks set to further discourage inbound investment in China. The leadership has set about “picking winners” and discouraging whole categories of companies and their practices as drivers of inequality and values not fitting with CCP principles. The country has seen huge surpluses in recent quarters on post-pandemic outbreak stimulus that have helped support the renminbi to multi-year highs. However, those surpluses could be set to decline on rising commodity prices (natural gas and oil, we are looking at you in particular) and the surge in goods demand could ease relative to services as economies “normalise” back to pre-Covid consumption mixes. In late Q3, the CNH looks too strong.

Explore currencies at Saxo

John J. Hardy

Global Head of Macro Strategy

Saxo Bank

Topics: Quarterly Outlook

Real yields a boon to tightening commodity markets

Tue, 05 Oct 2021 05:50:00 Z

The growth trajectory might slow a little, but the commodity rally is far from being out of fuel

After what has already been a strong year for commodities, we maintain a bullish outlook into Q4 and beyond. The strong rally seen across many key commodities this year has been driven by surging consumer spending following the Covid-led economic contraction—the biggest in living memory. As the impact of government spending and handouts from governments in Europe, China and the US begins to taper off, the market has started to cool a bit. However, supply constraints will, in our opinion, continue to support prices despite a slower growth trajectory.

Ahead of the final quarter of 2021, the Bloomberg commodity index—which tracks a basket of major commodity futures evenly split across energy, metals and agriculture—had risen by 25%, with gains seen across all sectors except precious metals. Later in this outlook we take a look at the reasons why gold, the most interest rate and dollar–sensitive of all commodities, has struggled to rally despite what should have been strong tailwinds from near-record low negative real yields.

First though, we need to take a closer look at the European power and gas markets. During September they surged to reach prices more than four times higher than the long-term average. At the time of writing Dutch gas—the European benchmark—was trading up 250% on the year, while German power and coal prices were both up by around 150%. These three markets, together with an also surging European emissions price, are not part of the mentioned index, which otherwise would have been higher than the ten-year high reached in September.

Source: Bloomberg Commodity Subindices, Saxo Group

*Not a BCOM member

Surging gas and power prices have also been felt outside Europe with hot weather–related demand not being met by a similar response from producers. Add to this the worst quarter for wind power generation in years, and the pressure on traditional fuels such as gas and even coal has been elevated. As a result we are heading into the northern hemisphere winter with stock levels, both in the US and especially in Europe, well below the average seen in recent years. If not arrested by a milder than normal winter or increased flows, either from LNG or from Russia through the soon-to-open Nord Stream 2 pipeline, a bleak—and expensive—winter could await Europe’s consumers and energy-heavy industries.

Agriculture sector: Following a very volatile planting and growing season troubled by adverse weather across the world, the agriculture sector should see more settled markets in Q4. However, with the UN FAO Global Food Price Index rising at an annual rate of 33%, the sector needs a period of normal weather in order for producers to rebuild stock levels. With that in mind the focus now turns to South America as they enter their growing season for key commodities from soybeans and corn to sugar and coffee.

Energy: We see the Brent crude oil price range shift higher by five dollars from the mid-60s to mid-70s that we forecast, and which prevailed throughout most of the third quarter. With crude oil settling into a range following the dramatic first half surge, the reflation trade also started to deflate, thereby reducing investor appetite for commodities. The fading momentum and return to rangebound trading helped drive a 23% reduction in the combined net long futures position held by funds in WTI and Brent.

With more optimistic Covid-19 developments expected into the year end, the IEA sees global oil demand rebound by 1.6 million barrels/day in October and continue to grow into the year end. Add to this the loss of more than 30 million barrels of production during the US hurricane season, along with the risk of failure to reach a nuclear deal with Iran, and the OPEC+ group of producers are likely to continue to support a gradual price increase by keeping monthly production increases at a steady pace of around 400,000 barrels per day.

Just as the reflation trade deflated as oil settled into a range, the prospect for higher prices into the year end and beyond could be the trigger needed to re-establish that focus, thereby supporting reflation darlings such as copper, and potentially even gold.

Industrial metals remain a key part of the decarbonisation process, and despite signs of slowing growth in China, the world may still be facing a decade where the physical world is too small for the aspiration and visions of our politicians and environmental movements. The more we decarbonise under the present model, the more we ‘metallise’ the economy. The supply chains, meanwhile, are inelastic due to a lack of support for permitting, board approval and a lack of capital flowing into the “dirty” production side of the equation due to ESG priorities.

With this in mind and given China’s ongoing efforts to cut pollution by curbing the output of several high-polluting metals from steel and two of the so-called green metals, aluminium and nickel, we continue to see underlying strength resulting in higher prices for ‘green’ metal, a group that—besides the two mentioned—also includes copper, tin, silver, platinum, lithium, cobalt and several rare earths.

Copper’s surge to a record high earlier this year was, to a certain extent, being driven by the reflation trade. Until it deflated during the third quarter this had provided a key source of support. While supply constraints lifted nickel and aluminium, copper is waiting for a renewed and strong pick-up in both physical and investment demand, with the speculative length the leanest it has been in more than a year. A break back above $10,000 would likely be the signal that triggers a fresh move towards new all-time highs. We believe that journey will resume sometime during the final quarter.

The effects of negative real rates on commodity prices: Real interest rates are an important influence on commodity prices. Low interest rates tend to increase the price of storable commodities through lowering the cost of carrying inventories and by encouraging increased speculative investment, as the opportunity cost of holding non interest or coupon paying commodities are non-existent in a negative real yield environment. Also investing in bonds in times when inflation surpasses the bond yields do not protect the purchasing power of the investor. This. combined with emerging tightness following years of plenty, have created a major incentive for investors to diversify some of their portfolio towards commodities and away from debt instruments.

Source: Bloomberg and Saxo Group

Precious metals led by gold remain stuck in a range that by now has prevailed for more than a year. Besides silver’s unsuccessful attempt to break above $30 during Q1, both metals have been stuck in ranges, with gold currently struggling to find a way out of its 200-dollar-wide range between $1700 and $1900. During the past quarter one of the interesting developments was gold’s inability to shine despite a renewed drop in Treasury yields, not least ten-year real yields which at one point hit a record low at -1.2%.

Gold’s inverse correlation with real interest rates has been well documented, and can be seen in the chart. Along with the ebb and flow of the dollar and the general level of risk appetite, we have some of the key components which determine the direction of gold. With strong risk appetite being a constant throughout the year, at least up until August, gold’s value as a diversifier diminished. With central banks successfully selling the transitory message about inflation, demand from financial investors in so-called “paper” gold such as futures, ETF’s and swaps began to fade.

Highlighting this, fund managers has been viewing nominal rate risks as greater than the tail risks of inflation, not least in response to raised expectations of an accelerated tapering timeline being presented by the US Federal Reserve. Underlying consumer demand meanwhile remains strong in the major physical centres in India and China, while many central banks increasingly are using gold to diversify their FX reserves. Given the July dislocation between gold and real yields we argue that, provided there’s no major change in the dollar, the yellow metal should be able to withstand a 20–25 basis rise in the ten-year real yield from current historic low levels.

Source: Bloomberg and Saxo Group

We maintain the view that the rising cost of everything will keep inflation levels elevated for longer, and with peak growth possibly already behind us, the outlook for equities looks more challenging. Add to this the prospect of less aggressive central bank action, and the foundation for another period of safe-haven and diversification demand could emerge. Gold needs to break above $1835 to reconnect with investors, and once it does this the signal for a return to an all-time high will have been given.

Explore commodities at Saxo

Ole Hansen

Head of Commodity Strategy

Saxo Bank

Topics: Quarterly Outlook

Crypto traders chasing high returns in decentralised applications

Tue, 05 Oct 2021 05:48:00 Z

Bitcoin's era of dominance could be under threat, as investors put large cash flows into blockchain applications.

The crypto markets have gained popularity for traders in their search for assets with positive returns in a negative real-rate environment. This is despite the large drawdowns in the crypto markets and the heavy energy consumption associated with running the larger crypto ecosystems. The crypto market is turning from being dominated by short-term traders who want to ride the speculative trends to longer-term investors who value the technical capabilities of the different blockchains, challenging Bitcoin’s market dominance. Some of these traders are locking their cryptos in various blockchain-based applications with the promise of high returns—despite the lack of a regulatory framework around investor protection.

The “2021 crypto trader”

The number of global crypto users has doubled in the first half of 2021, with a lot of new players in the game. Some of the new traders have a very high risk appetite with highly leveraged positions, vulnerable to even minor market downtrends. The flash-crash on September 7 saw more than $3.5bn of these positions liquidated in the crypto derivatives market within 24 hours. Despite aggressive trading in parts of the crypto community, a recent survey shows that fewer crypto traders are buying cryptos as a gamble in 2021 than in 2020, and more see crypto as an alternative to mainstream investments. The primary reason for buying cryptocurrencies is still to make a profit, both in the short and long term, as shown in Figure 1. But some of the buyers want to employ cryptos for other things such as transfers, payments and decentralised applications, and these additional features of cryptocurrencies have really started getting traction this year.

Figure 1: Survey by the digital asset marketplace Bakkt for investors in H1 2021. Why do they buy?

Large inflow into blockchain applications

Comparing 2021 to 2017, the inflow this year into the crypto market is more diverse, both within different cryptocurrencies and different use cases for the crypto tokens within the blockchain space. These cases include the value storage narrative, decentralised finance, non-fungible tokens (NFTs), gaming and stablecoins. The store of value narrative, particularly for Bitcoin, has intensified upon the increasing inflation, considering companies like MicroStrategy, Tesla and Square have added Bitcoin to their balance sheets.

The increasing risk appetite has not only affected Bitcoin, but has also impacted blockchains supporting smart contracts such as Ethereum. Smart contracts allow functionalities in addition to the classical transfer of value, and they have a variety of use cases in protocols operating on these blockchains. One major application is within decentralised finance (DeFi), which in the beginning of the year was rather unknown to the majority of crypto investors. The overall scope of DeFi is to facilitate classical banking services such as lending on a blockchain, removing the need for a potentially costly middleman to facilitate the service.

Since September 2020, the value locked in DeFi protocols on Ethereum has grown from $8bn to $84bn (see Figure 2), and other similar blockchains have seen comparable growth in value locked in DeFi. The value is mostly locked in protocols concerning trading, lending and stablecoins. By locking crypto tokens in decentralised protocols, investors are promised yields of up to 10% yearly, compared to the often negative interest rate of keeping fiat in a bank account. This is however not without risk, as when lending on decentralised protocols the lender covers the smart contract risk associated with hacking and errors, as well as the risks of a decentralised system such as forgetting the credentials to the wallet.

Figure 2: Amount of ETH locked in DeFi protocols. Source: The Block & Debank

Coming almost completely out of nothing is another big use of smart contracts. The hype for trading digitalised versions of arts, videos and illustrations has been booming this year. Trading of these so-called non-fungible tokens (NFT) are carried out on blockchains to ensure the uniqueness of the digitalised assets, with Ethereum being the largest right now. Trading of NFTs peaked in February when the previously unknown artist called Beeple sold an NFT for $69m. In August and continuing into September the trade volume of NFTs heated up. In particular, NFTs like CryptoPunks consisting of 10,000 unique characters have sold for millions each. It shows an increasing appeal for investors to diversify their portfolio by holding unique tokens, but more significantly an expectation that the market can solely go up.

Bitcoin’s market dominance challenged once again

With the rapidly evolving applications for smart contracts, Bitcoin is again challenged as the dominating cryptocurrency since it was challenged for the first time during the initial coin-offering boom in 2017. The market capitalisation fight has several combatants: Bitcoin as the first mover with its status of “digital gold” and renown as store of value; Ethereum as technically superior to Bitcoin and a first mover among the cryptos with smart contracts, although with scalability limitations in its current version; and newer generations of cryptos as they are technically superior when it comes to scalability, the green agenda and interoperability-wise, although many of these are still in the rollout/development phase. It is way too early to call a winner in this battle, but the tendency this year has clearly been in favour of the new generations of cryptos, as shown in Figure 3.

Figure 3 – Source: Coinmarketcap.

As we see it, the rest of 2021 will be driven by the expectation of smart contract applications and decentralised protocols. We expect an increased risk appetite for decentralised protocols in the hunt for large returns, and this will add value to the amount locked in DeFi protocols. However, investors in the crypto market should keep an eye on several risks. The big moves in the crypto market and particularly in the minor cryptocurrencies may not be driven by an underlying boost of fundamentals; it may merely be bubble-like movements where traders are buying solely to ride the price uptrend. On the regulation side, the decentralised protocols are lacking a regulatory framework and there’s no lawful protection of the investor; a single hacker attack can wipe out the whole investment. Many government agencies are pushing for increased regulation of DeFi, and it may have a significant impact on Ethereum and other DeFi blockchains, while Bitcoin should be less affected. On the other hand, an additional focus on the global green agenda may prove a drawback for Bitcoin due to the large power demands for running the Bitcoin blockchain, whereas only a minor impact may be seen in the less power-demanding, “greener” cryptocurrencies.

Explore crypto at Saxo

Anders Nysteen

Senior Quantitative Analyst, Saxo Bank

Saxo Bank

Topics: Quarterly Outlook