Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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OP 2019: Trump tells Powell 'you’re fired'
John J. Hardy
Chief Macro Strategist
Summary: Long-simmering tensions between US President Donald Trump and the chairman of the Federal Reserve come to a head and Jerome Powell is dismissed. His replacement's new policies shock many people, especially savers.
For the full list of Saxo's 2019 Outrageous Predictions, click here.
At the December 2018 Federal Open Market Committee meeting, Federal Reserve chair
Jerome Powell signs on with a slim majority of voters in favour of a rate hike, even as
corporate credit spreads are spiking higher and equities are showing signs of strain.
The hike is at least one too many and the US economy and US equities promptly drop
off a cliff in Q1’19. Rather than riding to the rescue, the Powel l Fed indicates that it
would be inappropriate to restart the serial bubble-blowing machine former Fed chair
Alan Greenspan revved up as far back as the ‘90s. Instead of another incarnation of
QE, the Powell Fed merely tinkers with the pace of quantitative tightening and a
one-off rate cut.
Powell argues that a clearing of bad debts could have long-term benefits. By the
summer of 2019, 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.
The ambitious Kashkari was the most consistent Fed dove and critic of tightening US
monetary policy. He is less resistant to the idea of the Fed serving at the government’s
pleasure and is soon dubbed ‘The Great Enabler’, setting President Trump up for a
successful run at a second term in 2020 by promising a $5 trillion credit line to buy
Treasury Secretary Mnuchin’s new zero-coupon perpetual bonds to fund Trump’s
“beautiful” new infrastructure projects and force nominal US GDP back on the path it
lost after the Great Financial Crisis.
Under Kashkari’s bold nominal GDP forcing, nominal GDP growth rises at a 7% clip,
with inflation running at 6% (even if reported at 3%), while Fed policy is all the way
down at 1%. That enables deleveraging you can believe in via fin ancial repression to
the great “joy of debtors and great detriment of savers.
Quarterly Outlook
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Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
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Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...