Saxo Bank’s ten outrageous predictions for 2015
Mario Draghi steps down from the ECB
European Central Bank president Mario Draghi is “very likely” to leave his role to return to Italy and enact real reform in 2015, Saxo Bank predicts.
Outlandish as it sounds, Jakobsen highlighted that Italy’s 89-year-old President Giorgio Napolitano, who reluctantly agreed to a second term in 2013 at a time of political crisis, is rumoured to be stepping down early next year.
“Draghi is very likely to quit the ECB. I think he is at the end of the road. If you wanted to create a situation that was acceptable for everyone, Draghi quits and goes back to Italy to help create a real, true, reform programme,” Jakobsen said.
Cocoa futures smash through $5,000/tonne
Commodity markets could also be hit by further unusual moves, as cocoa prices could nearly double from their record $3,318 per tonne following dwindling supply in the Ebola-hit area of West Africa. This would mean cocoa futures break through the $5,000/tonne level next year.
“Cocoa is an interesting crop because 90 per cent of supply comes from one area – West Africa. It is also mostly grown on small farms. With supply affected by concerns over the Ebola virus and under-investment in key production areas, the world is consuming far more cocoa than it is producing.”
China devalues yuan by 20 per cent
Meanwhile, China will look for a way out of its burgeoning crisis, and with Japan well underway with the biggest quantitative easing programme ever attempted, a weakening yen will put pressure on the yuan. This could lead China to devalue the yuan by as much as 20 per cent, Jakobsen predicts.
“China will be looking for any way it can to ease the enormous deflationary pressures that are the downside of a credit boom. As deflationary risks loom, China tears a page from the Bank of Japan policy playbook and devalues the yuan by 20 per cent,” he said.
Internet hacks bring Amazon to its knees
Amazon could be the next internet giant to be hit by internet hackers, whose attacks have been growing in frequency and audacity in recent years. An outage on the e-commerce site could see Amazon lose 50 per cent of its share price, partly due also to its overvaluation, Jakobsen said. This could have knock-on effects on other tech stocks, where some commentators have been pointing to signs of a bubble.
High yield spreads double over corporate bonds
Growing unease at the low yield on offer in the riskiest parts of the bond market will lead to investors heading for the exit in droves next year, Jakobsen forecasts.
The move will be driven by low oil and gas price putting pressure on small US commodity produces, many of which make up a large chunk of the US high yield market. “High yield is a derivative of equity markets. If you believe equities are overvalued, so too is high yield,” he argued.
UKIP landslide win means big spike in bonds
Jakobsen predicts the UK Independence Party could win up to 25% of the national vote next year, leaving some 15 per cent representation in parliament as anti-EU sentiment gains traction.
This could lead to the Conservatives joining an alliance with the party, and investors pull out of UK government bonds.
“UKIP… sensationally becomes the third-largest party in parliament. UK government debt suffers a sharp rise in yields.”
Japanese inflation hits 5 per cent
Since Japan has unleashed the largest quantitative easing programme everattempted, the logical outcome would be inflation not only reaching the Bank of Japan’s target of 2 per cent, but surging past to 5 per cent.
“Do you think if the Bank of Japan gets inflation going, it will stop at 2 per cent? There is no reason to think it would,” Jakobsen said.
UK house prices crash
UK property has been showing signs of overheating, but some data suggests strong sterling and soaring prices is beginning to turn foreign buyers away could accelerate in to an all-out housing crash next year.
“Surveys are already showing momentum is fast leaving the UK housing market, particularly in London. The impending Bank of England rate hike will see the UK suffer a housing crash, with prices falling as much as 25 per cent.”
Russia defaults again
Politically isolated, with government revenues struggling as the oil price stays low, and unable to attract foreign investment, Russia defaults once again. But, far from being a nightmare scenario, Jakobsen believes this could prove a long-term benefit to the economy.
“A default, like in 1998, is what is needed to secure the country’s future, together with a diplomatic solution on the Ukraine question,” he said.
Volcanic eruption cancels Europe’s summer
There is no need to look as far back as the eruption of Laki back in 1783 – the Icelandic volcano Bardarbunga is already active, and could erupt in 2015, leading to a massive released of gases to cloud the skies over Europe.
“The eruption shifts weather patterns and brings fears of a weak harvest across Europe, with grain prices doubling even as the volcano’s fallout proves more modest than feared,” Jakobsen said.