Saxo Bank 2022 Outrageous Predictions: Here comes a revolution!

HONG KONG, 2 Dec. 2021 – Saxo Capital Markets HK Limited (“Saxo Markets”), the online trading and investment specialist, has today released its 10 Outrageous Predictions for 2022. The predictions focus on a series of unlikely but underappreciated events which, if they were to occur, could send shockwaves across financial markets:

1. The plan to end fossil fuels gets a rain check
2. Facebook faceplants on youth exodus
   
3. The US mid-term election brings constitutional crisis
   
4. US inflation reaches above 15% on wage-price spiral
   
5. EU Superfund for climate, energy and defence announced, to be funded by private pensions
   
6. Women’s Reddit Army takes on the corporate patriarchy
   
7. India joins the Gulf Cooperation Council as a non-voting member
   
8. Spotify disrupted due to NFT-based digital rights platform
   
9. New hypersonic tech drives space race and new cold war 
   
10. Medical breakthrough extends average life expectancy 25 years

While these predictions do not constitute Saxo’s official market forecasts for 2022, they represent a warning against the potential misallocation of risk among investors who might typically assign just a one percent chance of these events materialising.  It’s an exercise in considering the full extent of what is possible, even if not necessarily probable, and particularly relevant in the context of this year’s unexpected Covid-19 crisis. Inevitably the outcomes that prove the most disruptive (and therefore outrageous) are those that are a surprise to consensus.

Commenting on this year’s Outrageous Predictions, Chief Investment Officer at Saxo Bank, Steen Jakobsen said:  

“The theme for 2022 Outrageous Predictions is Revolution. There is so much energy building up in our inequality-plagued society and economy. Add to that the inability of the current system to address the issue and we need to look into the future with a fundamental view that it’s not a question of whether we get a revolution but a more a question of when and how. With every revolution, some win and some lose, but that’s not the point—if the current system can’t change but must, a revolution is the only path forward. 

A culture war is raging across the globe and the divide is no longer simply between the rich and the poor. It’s also the young versus the old, the educated class versus the less educated working class, real markets with price discovery versus government intervention, stock market buy-backs versus R&D spending, inflation versus deflation, women versus men, the progressive left versus the centrist left, virtual signalling on social media versus real changes to society, the rentier class versus labour, fossil fuels versus green energy, ESG initiatives versus the need to supply the world with reliable energy—the list go on.

We collaborated globally on Covid vaccines in 2020 and 2021. Now we need a new Manhattan Project–-type endeavour to set the marginal cost of energy, adjusted for productivity, on the path to much lower levels while eliminating the impact of our energy generation on the environment. Such a move would unleash the most significant productivity cycle in history: we could desalinate water, make vertical farms feasible almost anywhere, increase computer powers to quantum states, and continue to explore new boundaries in biology and physics.

Remember that the world is forever evolving if at varying speeds, while business and political cycles are always finite.”

The Outrageous Predictions 2022 publication is available here with headline summaries below:

1. The plan to end fossil fuels gets a rain check
Summary: Policymakers kick climate targets down the road and support fossil fuel investment to fight inflation and the risk of social unrest while rethinking the path to a low-carbon future.

Market impact: The iShares Stoxx EU 600 Oil & Gas ETF (Ticker: EXH1:xetr) surges 50 percent as the whole energy sector gets a new lease on life

2. Facebook faceplants on youth exodus
Summary: The young abandon Facebook’s platforms in protest at the mining of personal information for profit; the attempt by Facebook parent Meta to reel them back in with the Metaverse stumbles.

Market impact: Facebook parent company Meta struggles, down 30 percent versus the broader market and is urged to spin off its components as separate entities, shattering Zuckerberg’s monopolistic dreams.

3. The US mid-term election brings constitutional crisis
Summary: The US mid-term election sees a stand-off over the certification of close Senate and/or House election results, leading to a scenario where the 118th Congress is unable to sit on schedule in early 2023.

Market impact: extreme volatility in US assets, as US treasury yields rise and the USD drops on hedging against the existential crisis in the world’s largest economy and issuer of the world’s reserve currency of choice.

4. US inflation reaches above 15% on wage-price spiral
Summary: By the fourth quarter of 2022, the wages for the lower half of US incomes are rising at an annualised 15% clip as companies scramble to find willing and qualified workers who are increasingly selective due to a rising sense of entitlement as jobs are plentiful relative to the meagre availability of workers at all skill levels.

Market impact: extreme volatility in US equity and credit markets. The JNK high-yield ETF falls as much as 20% and the VIXM mid-curve volatility ETF soars as much as 70%.

5. EU Superfund for climate, energy and defence announced, to be funded by private pensions
Summary: To defend against the rise of populism, deepen the commitment to slowing climate change, and defend its borders as the US security umbrella recedes, the EU launches a bold $3 trillion Superfund to be funded by pension allocations rather than new taxes.

Market impact: Bond yields harmonise across Europe, leading to German Bunds underperforming. EU defence, construction and new energy companies are some of the best performers.

6. Women’s Reddit Army takes on the corporate patriarchy
Summary: Mimicking the meme stock Reddit Army tactics of 2020-21, a group of women traders launch a coordinated assault on companies with weak records on gender equality, leading to huge swings in equity prices for targeted companies.

Market impact: The movement gets real results as the broader market catches on to the theme and joins in, forcing targeted company prices sharply lower, which sees companies scrambling to change their ways. It marks the beginning of a gender parity renaissance in markets.

7. India joins the Gulf Cooperation Council as a non-voting member
Summary: The world’s geopolitical alliances will lurch into a phase of drastic realignment as we have an ugly cocktail of new deglobalising geopolitics and much higher energy prices.

Market impact: The Indian rupee proves far more resilient than its EM peers in a volatile year for markets. The bubbly Indian stock market corrects with other equity markets in early 2022 but proves a strong relative performer from the intra-year lows.

8. Spotify disrupted due to NFT-based digital rights platform
Summary: Musicians are ready for change as the current music streaming paradigm means that labels and streaming platforms capture 75-95 percent of revenue paid for listening to streamed music. In 2022, new blockchain-based technology will help them grab back their fair share of industry revenues.

Market impact: Investors recognise that Spotify’s future is bleak, sending its shares down 33 percent in 2022.

9. New hypersonic tech drives space race and new cold war 
Summary: The latest hypersonic missile tests are driving a widening sense of insecurity as this tech renders legacy conventional and even nuclear military hardware obsolete. In 2022 a massive hypersonic arms race develops among major militaries as no country wants to feel left behind.

Market impact: massive funding for companies like Raytheon that build hypersonic tech with space delivery capabilities and underperformance of “expensive conventional hardware” companies in the aircraft and ship-building side of the military hardware equation.

10. Medical breakthrough extends average life expectancy 25 years
Summary: Young forever, or for at least a lot longer. In 2022, a key breakthrough in biomedicine brings the prospect of extending productive adulthood and the average life expectancy by up to 25 years, prompting projected ethical, environmental and fiscal crises of epic proportions.