Saxo Bank has released its annual set of ‘Outrageous Predictions’ for 2014. Although the probability of any one of the predictions coming true is low, they are deduced strategically by Saxo Bank analysts based on a feasible – if unlikely – series of market and political events.
This year’s predictions range from an EU wealth tax and the Bank of Japan’s cancellation of all its government debt to a nasty hangover for the tech sector’s ‘Fat Five’ and a plummeting Brent crude price as the market becomes awash with oil. Another outrageous claim is that US deflation will loom large following Act II of Congress’s political morass in January, while Germany may be dethroned as the Eurozone’s outperformer and fall back into recession.
Prospects for Brazil, India, South Africa, Indonesia and Turkey will also look grim if QE tapering in the US leads to higher marginal costs of capital from rising interest rates, exposing those with current account deficits and eroding the value of their currency. Meanwhile, Europe could face renewed political and economic turmoil when an anti-EU transactional alliance becomes the largest group in the European Parliament.
Saxo Bank chief economist Steen Jakobsen said the predictions weren’t meant to be a pessimistic outlook.
“This is about critical events that could lead to change – hopefully for the better,” he said. “After all, looking back through history, all changes, good or bad, are made after moments of crisis after a comprehensive failure of the old way of doing things. As things are now, global wealth and income distribution remain hugely lopsided which also has to mean that significant change is more likely than ever due to unsustainable imbalances. 2014 could and should be the year in which a mandate for change not only becomes necessary, but is also implemented.”
“We emphasise that the Outrageous Predictions are not Saxo Bank’s official calls for 2014, but rather an exercise in feeling out the major risks to capital preservation, and intended to encourage investors to prepare for the worst case scenario before trading or investing.”
