Outrageous Predictions 2024: Saxo Bank picks 8 global events to keep an eye out for

Danish lender and leader in online trading, Saxo Bank released its annual Outrageous Predictions for 2024. The report highlights eight possible events which seem unlikely but their occurrence is underappreciated. And in the event that they did occur, it would send shockwaves across the global financial markets.

Over the years, Saxo Bank’s ‘Outrageous Predictions’ have gained recognition for their uncanny ability to foreshadow developments that initially seemed improbable.

Notable examples from previous years which were closer to the truth than anticipated, include predicting a massive rally in Bitcoin in 2017, the postponed plan to end fossil fuels in 2022 and a country’s ban on meat production for 2023.

“The End of the Road” for complacency

Looking ahead to 2024, Saxo Bank sees a world at an inflection point, with the familiar road of the last decade coming to an end.

Commenting on this year’s predictions, chief investment officer at Saxo Bank, Steen Jakobsen said, “The smooth road the world has travelled on since the Great Financial Crisis, with stable geopolitics, low inflation, and low-interest rates, was disrupted during the pandemic years,” the report begins, indicating a shift towards a future filled with unpredictability.

Here are Saxo Bank’s 2024 Outrageous Predictions:

1. With oil at $150, Saudis buy Champions League franchise

As oil prices soar, Saudi Arabia extends its influence by acquiring one of the most coveted franchises in sports to create a World Champions League: “Saudi Arabia’s radical restructuring of its economy away from its dependency on oil revenues towards becoming a tourism, leisure, and entertainment powerhouse, receives an added boost from a meteoric rise in oil prices, which reach $150 per barrel around mid-year on stronger-than-expected demand. Now holding the keys to the cherished football competition, the Saudis immediately move to transform it into a global club competition.”

Market impact: The Manchester United stock price doubles and Brent crude goes to $150 per barrel.

2. Generative AI deepfake triggers a national security crisis

Generative AI, hailed as a productivity boon, becomes a national security threat after a daring AI deepfake heist against a high-ranking official in a developed country. Governments crack down on AI with new regulations, puncturing the AI hype as VCs flee the industry. Public distrust in AI-generated news soars and governments impose new laws, allowing only a small group of entities to disseminate public news.

Market impact: Traditional media companies approved by their governments for disseminating public news soar in value, with shares in The New York Times Company doubling. Adobe shares plunge as government penalises the company, as the catastrophic deepfake was made using its software.

3. Robert F Kennedy Jr wins the 2024 US presidential election

In 2024, for the first time in the history of the USA, a third-party candidate, Robert F. Kennedy Jr, wins the US presidential election. His populist platform against the war-mongering Democrats and against the corporate elites resonates with both disgruntled traditional Democratic and Trump supporters. A new political era in the USA begins with the dramatic pivot away from plutocracy, as voters demand an end to drastic inequality and injustice and the end of forever wars.

Market impact: Kennedy’s pro-peace message and promise to end the abuses of the US healthcare system and break up excess corporate power sees the stocks of defence, drug and healthcare companies nosedive, and the internet and info-tech monopolies trade nervously on concerns that a wider war against monopoly companies will follow.

4. Luxury plunges as EU goes Robin Hood, introducing wealth tax

As the EU needs more funding for various policy goals, including climate change mitigation, health care and education, the population realises how little in tax billionaires are actually paying. The EU Commission implements a law that annually taxes two per cent of wealth. The law sends shockwaves through Europe’s luxury industry, with the luxury behemoth LVMH plunging.

Market impact: LVMH shares plunge 40 per cent on the EU Commission’s new wealth tax and other parts of the luxury segment including Porsche and Ferrari see their share price suffer badly.

5. World hit by major health crisis as obesity drugs make people stop exercising

GLP-1 obesity drugs are seen as a solution to the world’s obesity epidemic, but the ease of taking a pill makes people stop exercising and increase their intake of junk food. As the supply of GLP-1 obesity drugs falls short of demand in 2024, the world sees a pickup in obesity rates and related health problems, resulting in lower global productivity.

Market impact: The processed food industry sees a significant demand lift, McDonalds and Coca-Cola stock prices outperform broader markets by 60 per cent each.

6. US heralds the end of capitalism with tax-free government bonds

The US government is forced to increase fiscal spending exponentially amid the 2024 elections to keep the economy going and avoid social unrest. Due to lingering inflation pressures and foreign investors repatriating capital, demand for US Treasuries remains sluggish, provoking a spike in US Treasury yields. In a desperate attempt to normalise borrowing costs, the US government makes income from government bonds tax-free.

Market impact: US Treasuries rally across all tenors, and the yield curve bull-flattens as investors can lock in the highest yields in decades without tax burdens. The stock market tumbles, but a selected group of cash-rich companies benefit from an inverted yield curve.

7. Deficit countries form ‘Rome Club’ to negotiate trade terms

The sustained and worsening divergence in current accounts between a group of surplus and deficit countries is a result of managed currencies and is not sustainable long-term. As the US debt situation has become uncontrollable, a group of six deficit countries form a ‘Rome Club’ to cooperate on reducing deficits by collectively negotiating new world trade terms with the surplus countries. We see gold, silver and cryptocurrencies doing very well in an unpredictable environment for the world’s reserve currency and the unsustainable current accounts among deficit countries.

Market impact: The fact that the world’s reserve currency is spinning out of control reduces faith in the fiat money system, setting up big gains for gold, silver, and cryptocurrencies.

8. Japan’s ‘lucky 7 per cent’ GDP growth rate forces BoJ to abandon yield curve control

Japan experiences a surprising economic surge, leading to a significant policy shift by the Bank of Japan.

“The deflation era in Japan has ended, bringing wage growth back. With a yield curve control policy in place, the Japanese economy is over-stimulated as real rates decline with nominal yields capped but inflation expectations rising. The BoJ is therefore forced to end its yield curve control policy in 2024. This causes a rout in global bond markets, as Japanese investors move money back home.”

Market impact: Yen strengthens as Japanese investors repatriate money to domestic assets, pushing USD-JPY below 130, EUR-JPY below 140 and AUD-JPY below 88.

Implications for markets and investors

Though these predictions are not Saxo Bank’s official market forecasts, they are a reminder to investors to consider all potential outcomes, including those that seem far-fetched. These ‘Outrageous Predictions’ are a deliberate effort to push the boundaries of market participants’ imaginations and prepare them for any eventuality.