The Strategist

Saxo Bank's "Outrageous" Predictions for 2016: Trump's Victory and Sky-High Oil Prices

12/16/2015 - 14:37

Danish Saxo Bank has released its annual forecast "Outrageous" 2016 predictions, trying to predict what will happen in 2016. The bank’s analysts believe that in the next year oil quotes will once again return to the value of $ 100 per barrel because of panic in OPEC. Venture capitalists will stop Unicorn hunting, Donald Trump will lead to the Republicans collapse, and the Olympic Games in Brazil will cure the emerging markets.
Today, the Danish investment bank Saxo Bank published its traditional 13th annual forecast within its project "Outrageous predictions". Chief economist Steen Jakobsen emphasizes that these "predictions are not official forecasts of Saxo Bank».  Not more than one or two of them can come true, yet they are "at least more plausible than the customary and traditional misconceptions."

OPEC will eventually get tired of chasing the cheap oil, working to the detriment of the cartel participants’ own economies. At a most unexpected moment, the organization will reduce raw materials supply on the market. This will trigger a rapid rise in oil prices, so that its peak will reach $ 100 per barrel. However then, all the quotes will be reduced and will fluctuate in the range of $ 50-70.

Dollar, which has been strengthening against euro during most of 2015, will go in the opposite direction the next year: "The increase in EUR/USD will not only make the European Central Bank lose face, but also will go against the conventional wisdom, as most investors and traders are sure that EUR/USD parity is literally on the doorstep." As a result, the euro/dollar pair mark will have reached 1.23 by the end of 2016.

Venture capital and Unicorns (start-ups with an estimated value over $ 1 billion) will become even rarer. Volume of investments into potential hits has reached the minimum value over the past 25 years already in the first half of 2015. Companies being indecisive about IPO and increasing critical mass will eventually lead to divestments and will stop the venture capital flow.

Donald Trump will not only become the next US president, but will also lead the entire Republican Party to a collapse. When Republicans will check themselves, it will already be too late to prevent Trump from victory in the first stage of the race. Ultimately, they will expose a candidate too weak to offer resistance to a Democratic Party candidate. Subsequently, the Republicans will lose the Congress election, and the party itself will sink in a deep crisis.

The Olympic Games in Brazil should help the emerging markets, say Saxo Bank’s experts. "Stabilization, investment costs for the Olympics and moderate reforms will support sentiment in Brazil. In addition, cheap local currency will boost exports from developing countries," - said the forecasters. As a result, stocks in emerging markets are expected to grow by 25%.

Silver will show the biggest rise in price in the metals market, tells Saxo Bank’s analytics. It will put on price by about one-third, at the time being able to get ahead of gold’s dynamics of growth by 20%.

After many years, agriculture will inflate, which will certainly benefit developed countries. The inflation will be triggered by extremely low yields due to series of natural disasters and drought, particularly the effect of El Niño.

The corporate bond market is waiting for the 2016 crash. Perhaps even trading will stop for some time. According to the investment bank’s experts, the reason for that will become reckless and overly aggressive policy of the US Federal Reserve. As a result, the market situation will be similar to the quotations collapse occurred after Lehman Brothers’ bankruptcy.

Finally, Saxo Bank predicts 2016 inequality’s victory over luxury. Faced with growing inequality and unemployment, Europe is planning to introduce a single basic income to help the poorest sections of society in 2016. These initiatives are discussed in Finland, Spain, Switzerland and France. The luxury market, meanwhile, continues to suffer from falling sales as the population shifted to the goods of mass production and high technology.