Steen Jakobsen, Saxo Bank’s CIO and chief economist is back with real predictionsfor 2016, following yesterday’s “Outrageous Predictions”.

Important Notes

  • What follows is a guest post by Jakobsen, with my comments at the very end.
  • I dispense with usual blockquotes (indentation).Everything starting from “Steen’s Chronicle” is his.
  • I corrected a few typos and reformatted things slightly for ease in readability, but otherwise, this is his forecast, not mine.

Steen’s Chronicle: The Big Nothing?

“I love to talk about nothing. It’s the only thing I know anything about” – Janet Yellen. Sorry, that was Oscar Wilde.

Finally! Saxo Bank’s Outrageous Predictions are out. Less important: Fed hiked!

My “Real” 2016 Outlook 

  • US Dollar will weaken – It will follow the “normal path” of weaker US$ post the first hike.
  • China will do better than expected – the easier monetary policy, but more importantly the “internationalization of RMB” will drive demand up, not down.
  • Emerging market will be the best performing asset – Both price and value being cheap.
  • Argentina moving to a floating currency is first good news in three years with more is to come.
  • 2016 will be a year of two halves: A bad start, and a good finish. S&P will trade both 1,800 and 2,200 during the year, but overall 2016 is a “year of transition from zero bound. A new business cycle will start with a “bust” and then a new start.
  • El Nino will impact inflation, growth and commodities positively.
  • Inflation will be higher next year – higher than expectations: El Nino adds 0.2%, base effect another 0.2% and then some demand pull and more credit flow.

Federal Reserve Hikes 

  • Fed says four hikes, market says maximum two – I’m with the Fed
  • The tone of the press conference and “dots” indicates Fed really believes in their forecasts.
  • Four hikes is in the cards for 2016, the market consensus is two hikes offered.
  • The Fed however does tend to deliver the promised hikes.
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