Here are one bank’s 10 ‘outrageous’ predictions that could shake markets in 2020

Here are one bank’s 10 ‘outrageous’ predictions that could shake markets in 2020
  • Saxo Bank, a Danish investment bank, published its 10 “outrageous” predictions for 2020 on Tuesday.
  • The report doesn’t reflect the firm’s official market forecasts for next year, but rather focuses on “unlikely but underappreciated events” driven by disruption.
  • The predictions range from macroeconomic forecasts to major shifts in specific industries.
  • Here are Saxo Bank’s 1o “outrageous” predictions for 2020.

Denmark-based Saxo Bank released its 10 “outrageous” predictions for 2020 on Tuesday.

In the report, the firm bank breaks down “unlikely but underappreciated events” that could shake the financial markets next year.

“We see 2020 as a year where at nearly every turn, disruption of the status quo is an overriding theme,” Saxo Bank chief economist Steen Jakobsen said in a statement. “The year could represent one big pendulum swing to opposites in politics, monetary and fiscal policy and, not least, the environment.”

The events range from macroeconomic and country-specific forecasts to major shifts in specific industries.

While the predictions don’t reflect Saxo Bank’s official market forecasts for 2020, they represent a “warning of a potential misallocation of risk,” for investors that see a small chance of the events materializing.

Here are Saxo Bank’s 10 “outrageous” predictions for 2020:

1. Chipmaker stocks collapse in ‘AI Winter’

According to Saxo Bank, the microchips powering the artificial intelligence revolution could start to yield diminishing returns in 2020.

“As reality sets in on the limitations of AI the SOX Index collapses 50% with deteriorating earnings growth as investments freeze in a new AI winter,” the firm wrote.

Chipmakers’ growth in recent years has come from investments in everything from AI to cryptocurrency. But those gains could sputter in 2020 as actual results fail to meet investor’s expectations, the bank added.

2. Stagflation rewarding value over growth stocks

“The iShares MSCCI World Value Factor ETF leaves the FANGS in the dust, outperforming them by 25%,” Saxo Bank predicts.

The bank continued: “Each credit cycle has required ever lower rates and greater doses of stimulus to prevent a total seizure in the US and global financial system.”

With a growing deficit and low interest rates in the US, the Federal Reserve could be forced to “super-size” its balance in the next recession, the firm said.

3. European Central Bank starts hiking rates

Saxo Bank predicts that Christine Lagarde, the new European Central Bank president, could decide to reverse the direction of monetary policy in Europe.

“She points out that maintaining negative deposit interest rates for a longer period could seriously harm the soundness of the European banking sector,” Saxo Bank wrote, referring to a hypothetical scenario.

The firm added: “In order to force euro area governments, and notably Germany, to step in and to use fiscal policy to stimulate the economy, the ECB reverses its monetary policy and hikes rates on January 23, 2020.”

Source: Business Insider

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