Summary: Saxo's hallmark Outrageous Predictions will be out next week. The provocative publication has never been about being right - it has always been about being outrageous. Still, sometimes the world catches up and becomes just the right amount of outrageous for the predictions to become true. We've checked our archives to find out which Outrageous Predictions from the past were much closer to the truth than anticipated.
All large market moves are driven by something that surprises expectations - sometimes outrageously. Crystal gazing with this in mind is the core of our annual Outrageous Predictions, as we try to suggest what events that seem unlikely right now could unfold and cause outrage in our world and financial markets - and provoke you to think differently along the way," says John J. Hardy, Head of FX strategy in Saxo.
In this article, we thought it would be fun to go back in time and see which of the past predictions came true even though truth isn't a measure of success with these: "Our Outrageous Predictions are not our baseline forecasts for what will happen in the New Year. Rather, they are meant as an exercise in provoking thought on what unanticipated developments can shock our world and financial markets," says Hardy.
Here's what he had to say about it: "Gold corrected to and actually went below USD 1,200 per ounce in 2013, as investors increasingly turned their attention to stocks and the dollar as central banks supported a post-GFC recovery in global growth. A major trigger was the April 2013 break below key support at $1,525 - a move that in our mind raised the risk of a bear market taking the price down towards $1,100," says Hansen.
The timing was a bit off, but the circumstances around it were pretty accurate. “We had a very strong sense that ‘protest votes’ would be coming both in the US election and also ultimately in a vote on Brexit” said Steen Jakobsen, CIO at Saxo.“We, to some extent, correctly talked about the ‘social-contract being broken’ – meaning society no longer benefitted as a whole with monetary policy, creating increased gap in equality.
“This call was too early, but context and reasoning was spot on. The split in the Tory Party could not be healed and the modus operandi of ‘Talking down to the voters’ was blatant mistake, which we used for this call.”
He further explains how the prediction came about: "We got the idea about this Outrageous Prediction in late 2017, as the year was about to end with astonishingly low volatility and Bitcoin had gone from just below $1,000 in late 2016 to around $10,000 in November 2017 (Bitcoin eventually rose to almost $20,000 before year end). Everyone speculated in Bitcoin and selling volatility in currencies and equities were heralded as easy predictable money. That's where we got this super awkward feeling from that the entire euphoria and these types of positions can have dramatic outcomes if conditions change even the slightest."
Garnry says that the volatility started in February and ended in dramatic fashion over Christmas: "The ‘Volmageddon’ event in February 2018 almost completely wiped out short volatility funds including some famous ETFs in these strategies as the VIX Index exploded from 13.64 to 50.30 in just two trading sessions. The event changed the short volatility complex in the subsequent years. Later in 2018, the market was trying to tell the Fed that it was doing a policy mistake by hiking its policy rates because the economy was deteriorating. It led to a selloff of 20% from the peak in October to the intraday bottom on 26 December 2018 with the most dramatic trading sessions happening over the Christmas holiday period when liquidity was drying up. Dramatic events that set the stage for the crazy bull-run in 2019 as investors again forgot everything about risk."
The overarching prediction also came into fruition, but it was regrettably fueled even further by the unforeseen invasion of Ukraine by Russia.
"Little did we know last November that the world was galloping into an energy crisis triggered by Russia’s war in Ukraine," says Ole S. Hansen, Head of Commodity Strategy, who explains how he then caught on to the idea that fossil fuels would become relevant again in 2022:
"Lack of investments and an increasingly urgent need to support gas over coal led us to come up with the 'The plan to end fossil fuels gets a rain check' which basically envisaged a more investor friendly environment for (up until then) shamed investment in so-called 'dirty energy production. A move that supported a decision by the EU to classify gas and nuclear as green investments," he says.
