Yahoo Finance 10 ‘outrageous’ predictions for 2020
With just days left in this decade, economists and leaders are forecasting major changes in the decade to come.
These range from neighbourhood marketplaces for spare electricity, freezing out electricity companies, to another GFC and the disappearance of credit cards, cash and parking meters.
However, Saxo Bank’s predictions for 2020 among the most far-flung.
In the investment bank’s annual Outrageous Predictions report, it names 10 “unlikely but underappreciated” events that could trigger financial shockwaves.
“This year’s Outrageous Predictions all play to the theme of disruption, because our current paradigm is simply at the end of the road,” said Saxo Bank chief economist Steen Jakobsen.
Related story: The outdated workplace trends we need to leave behind in 2019
Related story: This is what will keep Australian CEOs up at night in 2020
“Not because we want it to end, but simply because extending the last decade’s trend into the future would mean a society at war with itself, markets replaced by governments, monopolies as the only business model and an utterly partisan and a highly fragmented and polarised public debate.”
These are the bank’s 10 outrageous predictions
1. Australia’s nominal GDP to 8 per cent on modern monetary theory
In this prediction, Australia’s retail sales plunge to their lowest strength since the 1991 recession with houses in Sydney and Melbourne named the most expensive cities in the world.
As mortgage repayments grow, consumption lowers, leading the government to decide on a modern monetary-theory policy aimed at restoring confidence and boosting GDP.
“It leads to a massive increase in public spending in infrastructure, the health system and education, as well as the implementation of ambitious programmes to reduce the cost of living, provide affordable housing, reduce taxation and address environmental issues,” the report reads.
“The strong rise in fiscal spending contributes to a jump in consumption and investment, almost doubling Australia’s nominal GDP rate to 8 per cent in 2020.”
2. The sudden arrival of stagflation rewards value over growth
Stagflation occurs when inflation and unemployment increases while GDP decreases. This occurrence in the US sees the Fed “super-size” its balance sheet to finance Trump’s new infrastructure projects.
“But a strange thing happens: wages and prices rise sharply as the stimulus works its way through the economy, ironically due to the under-capacity in resources and skilled labour from prior lack of investment.
“Rising inflation and yields in turn spike the cost of capital, putting zombie companies out of business as weaker debtors scramble for funding. Globally, the USD suffers an intense devaluation as the market recognises that the Fed will only accelerate its balance sheet expansion while keeping its policy rate punitively low.”
3. European Central Bank folds and hikes rates
The European Central Bank president, Christine Lagarde, who has previously supported negative interest rates changes her mind and says monetary policy has gone too far.
Under this prediction, she says that maintaining negative deposit interest rates could harm the European banking sector.
“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. This first hike is followed by another a short time later that quickly takes the policy rate back to zero and even slightly positive before year-end.”
4. In energy, green is not the new black
As lower fossil fuel energy prices and investor distaste for coal energy combine, green energy ends up costing 23 per cent more.
“And not only will the oil and gas industry be a surprising winner in 2020 — the clean energy industry will simultaneously suffer a wake-up call.”
5. South Africa electrocuted by ESKOM debt
South African electricity utility ESKOM’s growing debt continues to pull the South African government’s budget and GDP down.
“The ESKOM fiasco may be the straw that will break the back of creditors’ willingness to continue funding a country that hasn’t had its financial or governance house in order for decades.”
6. US President Trump announces America First Tax to reduce trade deficit
Facing a defeat in the 2020 election, Trump decides to implement a new tax designed to strengthen his protectionist narrative.
The America First Tax sees US-based production favoured, with all existing tariffs cancelled to make room for a flat 25 per cent tax on all gross revenues sourced from foreign production.
“This brings stinging protests from trading partners for what are really just old tariffs in new clothes, but the administration counters that foreign companies are welcome to shift their production to the US to avoid the tax.”
7. Sweden breaks bad
Sweden’s relatively progressive politics alienates certain parts of the population, leading to recession.
“As often seems the case in Swedish policymaking, just as they took progressive taxation too far and collapsed the economy in the early 90’s, they have now taken political correctness on immigration so far that they have become politically incorrect.
“They are ignoring the large and growing contingent of Swedes who are questioning that policy, shutting them out of the debate.”
8. Democrats win a clean sweep in the US 2020 election, driven by women and millennials
The largely older, male cohort that brought Trump to power begins to fade, with millennials now exercising greater political power.
“The vote on the left is thoroughly rocked by dislike of Trump – with suburban women and millennials showing up to express their revulsion for Trump. The Democrats win the popular vote by over 20 million, grow their control of the House, and even narrowly take the Senate.”
9. Hungary leaves the EU
Hungary claims it is suffering from “mass immigration”, leading it to exit the EU.
10. Asia launches new reserve currency in move away from US dollar dependence
And Asia launches a digital reserve currency, taking the US dollar index down by 20 per cent.
“To confront a deepening trade rivalry and vulnerabilities from rising US threats to weaponise the US dollar and its control of global finances, the Asian Infrastructure Investment Bank creates a new reserve asset called the Asian Drawing Right, or ADR, with 1 ADR equivalent to 2 US dollars, making the ADR the world’s largest currency unit.”
Jakobsen said these 10 predictions highlight 2020 as the year of disruption of the status quo.
“The year could represent one big pendulum swing to opposites in politics, monetary and fiscal policy and, not least, the environment. In politics, this would mean the sudden failure of populism, replaced by commitments to “heal” instead of to divide.
“In policymaking, it could mean that central banks step aside and maybe even slightly normalise rates, while governments step into the breach with infrastructure and climate policy-linked spending.”
Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.
