Saxo Bank, the leader in online trading and investment, today announced its annual Outrageous Predictions for 2024. The predictions focus on a series of unlikely but underappreciated events which, if they were to occur, would send shockwaves across the financial markets.
“The End of the Road” for Complacency
Entering 2024, Saxo Bank sees a world at an inflection point, with the familiar road of the last decade coming to an end. Commenting on this year’s Outrageous Predictions, Chief Investment Officer at Saxo, Steen Jakobsen said: “The smooth road the world has travelled on since the Great Financial Crisis, with stable geopolitics, low inflation, and low interest rates, was disrupted during the pandemic years,” the report begins, indicating a shift towards a future filled with unpredictability.
Saxo Bank’s 2024 Outrageous Predictions:
As oil prices soar, Saudi Arabia extends its influence by acquiring one of the most coveted franchises in sports to create a World Champions League: “Saudi Arabia’s radical restructuring of its economy away from its dependency on oil revenues towards becoming a tourism, leisure, and entertainment powerhouse, receives an added boost from a meteoric rise in oil prices, which reach $150 per barrel around mid-year on stronger-than-expected demand. Now holding the keys to the cherished football competition, the Saudis immediately move to transform it into a global club competition.”
The Manchester United stock price doubles and Brent crude goes to $150 per barrel.
GLP-1 obesity drugs are seen as a solution to the world’s obesity epidemic, but the ease of taking a pill makes people stop exercising and increase their intake of junk food: “As supply of GLP-1 obesity drugs is expanded, prices come down and governments choose to designate the obesity drugs as vital for improving health and stopping the obesity epidemic… However, in a turn of events, supply of GLP-1 obesity drugs is unable to meet the widespread demand, and patients need to wait for years to get their injections. Meanwhile, they stop exercising or keeping to a healthy diet now that a pill can keep weight in check, fuelling a major health crisis. Global adult obesity rates shoot up from the current 39% to 45% in 2024.
The processed food industry sees a significant demand lift, McDonalds and Coca-Cola stock prices outperform broader markets by 60% each.
The US adopts a radical fiscal strategy to tackle its economic challenges by incentivizing investment in government bonds. “The US government is forced to increase fiscal spending exponentially amid the 2024 elections to keep the economy going and avoid social unrest. Due to lingering inflation pressures and foreign investors repatriating capital, demand for US Treasuries remains sluggish, provoking a spike in US Treasury yields. In a desperate attempt to normalise borrowing costs, the US government makes income from government bonds tax-free.”
US Treasuries rally across all tenors, and the yield curve bull-flattens as investors can lock in the highest yields in decades without tax burdens. The stock market tumbles, but a selected group of cash-rich companies benefit from an inverted yield curve.
Generative AI, hailed as a productivity boon, becomes a national security threat after a daring AI deepfake heist against a high-ranking official in a developed country. Governments crack down on AI with new regulations, puncturing the AI hype as VCs flee the industry:
“In a high-stakes game, a criminal group deploys the most deceptive generative AI deepfake the world has ever seen, phishing a high-ranking government official to hand over top-secret state information from a developed country. The daring move and success trigger the biggest national security crisis since WWII, ushering in a new era of far-reaching AI regulation. In a historic move to deal with the catastrophic side effects of generative AI, the US and EU declare that all content produced by a generative AI should have the label ‘Made by AI’. The generative AI deepfake incident goes from national security crisis to full-blown public distrust in information delivered on the Internet, as AI-produced content swells to 90% of all information.”
Traditional media companies approved by their governments for disseminating public news soar in value, with shares in The New York Times Company doubling. Adobe shares plunge as government penalises the company, as the catastrophic deepfake was made using its software.
A coalition of deficit countries aims to restructure global trade dynamics in their favor:
“As the US debt situation has become uncontrollable, a group of six deficit countries form a ‘Rome Club’ to cooperate on reducing deficits by collectively negotiating new world trade terms with the surplus countries. The argument goes that resetting the deficits through gradual pegged revaluations of the surplus countries would enable a global reset, creating a more equal and stable economic model. The six founding countries of the ‘Rome Club’ are the US, UK, India, Brazil, Canada and France. Adjusting the divergence of the current account between the key countries is going to be a painful adjustment for the highest surplus countries which are China, Germany, Norway, Japan, the Netherlands and Singapore.”
The fact that the world’s reserve currency is spinning out of control reduces faith in the fiat money system, setting up big gains for gold, silver, and crypto currencies.
In a stunning political upset, RFK Jr. captures the presidency, ushering in a new political direction for the United States: “In 2024, for the first time in the history of the USA, a third-party candidate, Robert F. Kennedy Jr, wins the US presidential election. His populist platform against the war-mongering Democrats and against the corporate elites resonates with both disgruntled traditional Democratic and Trump supporters. A new political era in the USA begins with the dramatic pivot away from plutocracy, as voters demand an end to drastic inequality and injustice and the end of forever wars.”
Kennedy’s pro-peace message and promise to end the abuses of the US healthcare system and break up excess corporate power sees defense, drug and healthcare companies nosedive, and the internet and info-tech monopolies trade nervously on concerns that a wider war against monopoly companies will follow.
Japan experiences a surprising economic surge, leading to a significant policy shift by the Bank of Japan. “The deflation era in Japan has ended, bringing wage growth back. With a yield curve control policy in place, the Japanese economy is over-stimulated as real rates decline with nominal yields capped but inflation expectations rising. The BoJ is therefore forced to end its yield curve control policy in 2024. This causes a rout in global bond markets, as Japanese investors move money back home.”
Yen strengthens as Japanese investors repatriate money to domestic assets, pushing USDJPY below 130, EURJPY below 140 and AUDJPY below 88.
The European Union’s new wealth tax leads to a downturn in the luxury market, with major repercussions for high-end brands: “It is a great irony that the EU, which is the world’s biggest welfare system, has created 499 USD billionaires who are paying the lowest amount of personal tax in percentage of wealth compared to billionaires from North America and East Asia.
As social unrest in Europe is constantly at the edge of eruption, and as costs associated with the green transformation, the war in Ukraine and general inflation rise, the EU Commission commits to the July 2023 European Citizens’ Initiative (ECI) entitled ‘Taxing great wealth to finance the ecological and social transition’.
The EU Commission implements a law that annually taxes 2% of wealth on billionaires. This modern version of Robin Hood sends shockwaves through the European luxury industry, as recent studies have shown a strong correlation between the pursuit of luxury items and levels of income and wealth inequality.”
LVMH shares plunge 40% on the EU Commission’s new wealth tax and other parts of the luxury segment including Porsche and Ferrari see their share price suffering badly.
Implications for Markets and Investors
Though these predictions are not Saxo Bank’s official market forecasts, they are a reminder to investors to consider all potential outcomes, including those that seem far-fetched. Outrageous Predictions are a deliberate effort to push the boundaries of market participants’ imaginations and prepare them for any eventuality.
For a comprehensive understanding of Saxo Bank’s 2024 Outrageous Predictions, please visit Saxo.