Yahoo Finance 7 outrageous predictions for 2019
With how volatile 2018 has proven to be, Aussies are learning not to put too much stock in forward-looking outlooks and predictions.
But what if we try to predict the craziest thing that could happen? This is exactly what Saxo Bank tries to do with their annual list of “outrageous” predictions for the upcoming year.
“This year’s edition has a unifying theme of ‘enough is enough’,” said Saxo Bank chief economist Steen Jakobsen.
“The point is to provoke debate and to expand our awareness of what might go wrong in 2019. Through this process, we can prepare for potentially earth-shaking challenges to our portfolios and even our livelihoods.”
Here are the 10 crazy – but possible – things that could happen in the incoming year.
1. The Australian property market nosedives – hard
In this scenario, the post-Royal Commission era leaves banks forced to tighten the screws on lending, and the resulting plummet in credit growth sees “the curtains close” on the nation’s “property binge”.
“Australia falls into recession for the first time in 27 years as the plunge in property prices destroys household wealth and consumer spending,” predicts Saxo Bank market strategist Eleanor Creagh. “The bust also contributes to a sharp decline in residential investment. GDP tumbles.
“The blowout in bad debt squeezes margins and craters profits. The banks’ exposure is too great for them to cover independently and bailout would be required from the RBA, perhaps recapitalising and securitising mortgages onto the RBA’s balance sheet.”
2. Apple secures funding for Tesla at $520 per share
In this scenario, Apple moves into the automated car space, Saxo Bank head of equity strategy Peter Garnry predicts. “Acknowledging that Tesla needs more financial power and Apple needs to expand its ecosystem to the car in a more profound way … Apple goes after Tesla.
“It secures funding for the deal at a 40% premium of $520 dollars a share – acquiring the company at $100/share more than Elon Musk’s errant ‘funding secured’ tweet.”
3. US President Donald Trump fires the US Federal Reserve chair Jerome Powell
The Fed hikes one too many times and US equities “promptly drop off a cliff,” says Saxo Bank head of foreign exchange strategy John Hardy.
“By the summer, with equities in a deep funk and the US yield curve having moved to outright inversion, an incensed President Trump fires Powell and appoints Minnesota Fed President Neel Kashkari in his stead.”
4. The UK crowns Jeremy Corbyn prime minister
After nearly three “challenging and thankless” years as prime minister, Theresa May runs out of lives.
“Labour sweeps to a resounding victory and names Jeremy Corbyn as prime minister on the promise of comprehensive progressive reform and a second referendum on a ‘to-be defined’ Brexit deal,” predicts Saxo Bank global macro strategist Kay Van-Petersen.
5. Negative chain reaction sparked in corporate bonds
“2019 proves the year of credit dominos toppling in the US corporate bond market,” writes Garnry.
“The negative chain reaction in corporate bonds sets off massive uncertainty in high-yield bonds leading to a Black Tuesday for exchange-traded funds tracking the US high-yield bond market”.
6. Germany enters a recession
Germany’s car industry, its “crown jewel” representing 14 per cent of its GDP, suffers – with no help from Trump’s tariffs, writes Jakobsen.
“2019 will be the peak of anti-globalisation sentiment and will create a laser-like focus on costs, domestic markets and production, and the further use of big data and reduced pollution footprint – the exact opposite of the trends that have benefitted Germany since the 1980s. As such, we see a recession arriving as early as Q3 2019.”
7. IMF and World Bank stop measuring GDP
In this hypothetical, IMF and the World Bank’s chief economists announce their intent to stop measuring GDP, arguing that the concept of measuring output per hour worked is ineffective in capturing the real impact of services and accounting for environmental issues.
“This unprecedented decision by the IMF and the World Bank also symbolises the transition away from the central bank-dominated era that has been associated with the collapse in global productivity since the global financial crisis,” writes Saxo Bank head of macro analysis Christopher Dembik.
Anyway, what’s the worst that could happen?
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