Saxo banks annual series of outrageous is here with this years theme covering a world that is increasingly saying enough is enough. While these predictions are not Saxos official expectations for the year ahead, they point out some of the risks that have been unallocated by the market so far.
EU Announces a Debt Jubilee
Saxo said that unsustainable levels of public debt, a populist revolt, rising interest rates from European Central Bank (ECB), and sluggish growth could lead the EU to announce a debt jubilee in 2019, writing off large amounts of debt across the continent. Possible eurozone contagion could lead to the ECB backing monetisation if the EU lurches into recession. Italys budget crisis and Greeces ongoing issues could damage confidence while the yellow vest protests in France indicate that people are unhappy with the status quo.
Trump Fires Powell
US President Donald Trump has made no secret of his displeasure at the Federal Reserve in recent months and Saxo reckons Jerome Powell could hear the immortal words “youre fired” in 2019. Decembers proposed rate hike could send equity markets off a cliff in Q1 2019, according to Saxos outrageous predictions, giving Trump the opportunity to bring in the dovish Minnesota Fed President Neel Kashkari instead.
A Solar Flare can Inflict $2-trillion Damage
Like something out of a flimsy Hollywood script a massive solar flare could wreck Western Hemisphere satellite technology in 2019 and cause around $2 trillion in damage, according to Saxo. A new solar cycle kicks in during 2019 and excess radiation could have devastating effects if the sun decides to rain chaos on its intergalactic neighbour.
Global Transportation Tax is Enacted
Another insanely hot summer in Europe could make the aviation and shipping industries the targets of a new tax on transportation to limit the damage of climate change in 2019. Saxo points out that the industries currently have substantial tax benefits which could see them hit by a new Global Transportation Tax (GTT).
Credit Crunch Pushes Netflix into Trouble
GEs debt struggles in 2018 have been well documented with Saxo predicting more companies could enter the vortex of a corporate credit crunch with Netflix one of those affected. Investors start to fret about Netflixs excess leverage with a net debt to EBIDTA after CAPEX ratio of 3.4 and over $10 billion in debt on the balance sheet causing the companys funding costs to double.
Australia Launches QE to Solve Housing Bust
Saxo says Australia could fall into recession for the first time in 27 years after a plunge in property prices destroys household wealth and consumer spending. Saxo suggests that Australias banks would be unable to independently service this exposure leading to a bailout from the Reserve Bank of Australia, and the introduction of quantitative easing
Apple Could Buy Tesla
Elon Musks controversial tweet suggesting that Tesla had secured funding at $420 a share drew the ire of investors and later the SEC. Saxo playfully suggests that Apple, rather than Saudi Arabia, could be a new option for the electric vehicle maker. Saxo points out that Apple is keen to move deeper into consumers lives and suggests that automobiles could be the next frontier as vehicles become increasingly connected to technology.
PM Corbyn Sends Pound to Parity with Dollar
One of Saxos outrageous predictions is that 2019 sees Labour sweep to a large general election win and sets off on a “mid-20th century-style socialist scorched earth campaign to even out the UKs gross inequalities.” Rising inflation, fleeing wealthy nondomiciled individuals, and lower business investment sees sterling plunge to parity against the dollar, for the first time ever.
Germany Enters Recession
Saxo suggests Europes largest economy could slip into recession in 2019, with weaker car sales dragging the country into trouble. Saxo points out that by 2040 55 per cent of all new car sales will be electric vehicles and that Germany, a global automotive leader, is well behind the trend. A recession as early as Q3 next year could be on the cards if sluggish car sales continue, according to Saxo.
IMF and World Bank will Stop Measuring GDP
In an interesting development which could have far reaching consequences Saxo suggests that the IMF and World Bank could turn their back on GDP in 2019, and instead use productivity as a growth measure. “They (IMF and World Bank) argue that GDP has failed to capture the real impact of low-cost, technologybased services and has been unable to account for environmental issues, as attested by the gruesome effects from pollution on human health and the environment in India and elsewhere around the world.”
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