Courtesy of Mish.
Steen Jakobsen, Saxo Bank’s CIO and chief economist is back with real predictions for 2016, following yesterday’s “Outrageous Predictions”.
Important Notes
- What follows is a guest post by Jakobsen, with my comments at the very end.
- I dispense with usual blockquotes (indentation). Everything starting from “Steen’s Chronicle” is his.
- I corrected a few typos and reformatted things slightly for ease in readability, but otherwise, this is his forecast, not mine.
Steen’s Chronicle: The Big Nothing?
“I love to talk about nothing. It’s the only thing I know anything about” – Janet Yellen. Sorry, that was Oscar Wilde.
Finally! Saxo Bank’s Outrageous Predictions are out. Less important: Fed hiked!
My “Real” 2016 Outlook
- US Dollar will weaken – It will follow the “normal path” of weaker US$ post the first hike.
- China will do better than expected – the easier monetary policy, but more importantly the “internationalization of RMB” will drive demand up, not down.
- Emerging market will be the best performing asset – Both price and value being cheap.
- Argentina moving to a floating currency is first good news in three years with more is to come.
- 2016 will be a year of two halves: A bad start, and a good finish. S&P will trade both 1,800 and 2,200 during the year, but overall 2016 is a “year of transition from zero bound. A new business cycle will start with a “bust” and then a new start.
- El Nino will impact inflation, growth and commodities positively.
- Inflation will be higher next year – higher than expectations: El Nino adds 0.2%, base effect another 0.2% and then some demand pull and more credit flow.
Federal Reserve Hikes
- Fed says four hikes, market says maximum two – I’m with the Fed
- The tone of the press conference and “dots” indicates Fed high believe in their forecasts.
- Four hikes is on the cards for 2016, the market consensus is two hikes offered – the gap remains and for now the risky assets trades on fading the Fed.
- The Fed however does tend to deliver the promised hikes.
An excellent piece “Historical lesson from Federal Reserve rate-hike cycles” from Allianz Global Advisors proves the point:
Of course, most commentators think “it’s different this time” ….
