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Saxo Bank makes predictions for 2020

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Saxo Bank makes predictions for 2020
December 04
10:00 2019

Saxo Bank is known for its own annual predictions for the year. The Bank never gets tired of emphasizing that the findings are not official market forecasts, but that doesn’t seem like such a bad thing if you listen to them.


Trump will establish a 25% tariff on goods produced abroad
Negotiations with China may turn out to be positive, but at some point the PRC will no longer be able to comply with the terms of buying American products. The foreign trade deficit will increase. Trump’s popularity will begin to decline, so he and his team will again want to use protectionism. As a result, a total 25% duty will be imposed on goods produced abroad.

Foreign companies wishing to sell their goods in America will have no choice. They will be forced to transfer production to the United States. In order to avoid a large tax, domestic corporations will also begin to return production to their homeland.

As a result, the American labor market will become stronger. Inflation will rise to 5%; the yield on 10-year securities will increase to 6%.


The dollar is losing ground
The Fed’s balance sheet will continue to increase in order to finance Trump’s projects. At the same time, the interest rate will remain low. Also, there will be a large fiscal deficit. Salaries and prices will rise rapidly due to a lack of skilled workforce.

Inflation and increased profitability of 10-year securities will raise the cost of capital, which will affect weak debtor companies. They will be squeezed out of the market. The Federal Reserve will continue to build up its balance sheet, keeping the rate very low. In turn this will lead to the dollar devaluation.


Warren will become President and Democrats will gain complete control
Elizabeth Warren will win the elections in 2020. Democrats will control both houses of Congress. Already at the beginning of this year, Trump has a rather low rating. In past election, elderly white voters secured him his victory. Since then, there has been a marked reduction of this electorate.

Now, the main population sector in America is people aged between 20 and 40 years old. They have more liberal views and are ready to dismiss Trump.


At the next meeting, the European Central Bank will raise the rate
Christine Lagarde, President of the European regulator, supports the policy of negative rates. However, there will be a moment when she turns the thing around and declares that maintaining current rates will harm the banking system.

Over several meetings, the deposit rate will become zero, and by the end of the year it may even turn into a small plus. Such measures will force the main economies of the Eurozone to move towards stimulation of domestic markets through budgetary measures.


Brighter days for Russia
Amid the slowdown in shale oil production by America, OPEC and the Russian Federation will decide to reduce production even further. A large-scale closing of short deals will start on the market. This will lead to an increase in the price of Brent crude oil to $ 90 per barrel. Russian Rosneft will increase capitalization by 50%. Since Russia’s budget is planned relative to the oil price of $ 49, the country will receive a large income.

Last year, the palladium price grew at a good pace. Probably in 2020, this trend will continue. Metal is used for reducing automobile emissions.

In addition to it, demand will increase for another commodity- nickel. It will replace the cobalt used in batteries for electric cars. Last year, India reduced nickel exports. This will give the opportunity to Nornickel to earn quite a lot.  Its securities will double in price.


Asia will create its reserve currency
The Asian region will create its own currency, independent of the dollar. Its nominal value will be equal to 2 US dollars. Trade in the region will move to a new currency. The Russian Federation and OPEC will also do the same. Because of this, the dollar will lose about 20% of the value.


Hungary will withdraw as the EU member
Hungary’s policy runs counter to the European Union. It limits the freedom of the media, minorities, human rights defenders, science and the courts. It will be difficult for the parties to agree on a change in course, and in the end they will make a decision to withdraw from the EU.


Sweden is facing crisis
The country will begin to integrate migrants into the society. It will reduce the coverage of social services and strengthen fiscal stimulus measures. The exchange rate will increase significantly. However, the population, already now dissatisfied with the situation with migrants, will begin to demand a change in policy. A social crisis, followed by an economic downturn, is coming.


Eskom will put South Africa at risk of default
Eskom is engaged in providing the population with electricity. For a long time now, the company cannot put some order into its finances and management, but only borrows from the world. This year, the lenders will lose their patience, and they will refuse to finance the country.


Securities of semiconductor manufacturing companies will fall
Shares of semiconductor companies will lose 50%. At this stage, the technology has stopped in development. Cloud services are becoming very common. Thus, the scale of chip production can drop significantly.


The material was prepared with the participation of Katya Wilson,
a leading analyst of the brokerage company UFT Group

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