A familiar end-of-year event is when the Danish wealth management and trading platform sets out bold predictions, reflecting its biases, hopes and ideas about what might be possible. Designed to entertain and also stimulate thinking, here are the 10 predictions for 2023.
Prediction is difficult But whatever the difficulties, having some idea of what the future might hold is important for wealth managers when trying to set asset allocation and frame clients' expectations. A firm which is not afraid to make bold predictions – even if they are “outrageous” – is Denmark’s Saxo Bank. The team know that some of their ideas might not pan out at all, but the point is to prompt fresh thinking, and be willing to challenge preconceived ideas. And, as the firm likes to point out, some of its predictions have turned out to be on the money.
“This year’s Outrageous Predictions argue that any belief in a return to the disinflationary pre-pandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual military sense, or due to profound supply-chain, energy and even financial insecurities that have been laid bare by the pandemic experience and Russia’s invasion of Ukraine,” Steen Jakobsen, chief investment officer, Saxo Bank, said.
Here are Saxo’s predictions for 2023:
Billionaire coalition creates trillion-dollar Manhattan
project for energy
“In 2023, owners of major technology companies and other technophile billionaires will grow impatient with the lack of progress in developing the necessary energy infrastructure that would allow them to both pursue their dreams as well as address the needed energy transition. Teaming up, they create a consortium code-named Third Stone, with the goal of raising over a trillion dollars to invest in energy solutions.”
"Market impact: the companies that partner with the Third Stone consortium and can help realise its vision soar in value in an otherwise weak investment environment."
French President Macron resigns
“The June 2022 legislative elections saw President Emmanuel Macron’s party and his allies lose their outright majority in Parliament. Confronted with a strong opposition from the left-wing alliance NUPES and Marine Le Pen’s far-right National Rally, the government has no other choice but to pass major laws and the 2023 budget by a fast-track decree – triggering the constitution's Article 49.3. Nevertheless, bypassing lawmakers cannot be a way to govern in a democracy. He therefore understands that he will be a lame duck for the next four years and he will not be able to pass his signature pension reform. Following the example of Charles de Gaulle in 1946 and 1969, Macron unexpectedly decides to resign in early 2023. Macron’s resignation opens the door of the Élysée Palace to the far-right contestant Le Pen, thus causing a wave of stupefaction throughout France and beyond and setting up the latest existential challenge to the EU project and its shaky institutional foundations.”
Gold rockets to $3,000 as central banks fail on inflation
“In 2023, gold finally finds its footing after a challenging 2022, in which many investors were left frustrated by its inability to rally even as inflation surged to a 40-year high. 2023 is the year that the market finally discovers that inflation is set to remain ablaze for the foreseeable future. Fed policy tightening and quantitative tightening drives a new snag in US treasury markets that forces new sneaky ‘measures’ to contain treasury market volatility that really amounts to new de facto quantitative easing. And with the arrival of spring, China decides to pivot more fully away from its zero-Covid policy, touting effective treatment and maybe even a new vaccine. Chinese demand unleashed again drives a profound new surge in commodity prices, sending inflation soaring, especially in increasingly weak dollar terms as the Fed’s new softening on its stance punishes the greenback. Under-owned gold rips higher on the sea-change reset in forward real interest rate implications of this new backdrop.”
In 2023, the hardest of currencies receives a further blast of support from three directions. First, the geopolitical backdrop of an increasing war economy mentality of self-reliance and minimising holdings of foreign FX reserves, preferring gold. Second, the massive investment in new national security priorities, including energy sources, the energy transition, and supply chains. Third, rising global liquidity as policy makers move to avoid a debacle in debt markets as a mild real growth recession takes hold. Gold slices through the double top near $2,075 as if it wasn’t there and hurtles to at least $3,000 next year.”
Foundation of the EU armed forces
“Russia’s invasion of Ukraine brought the largest ‘hot war’ to Europe since 1945, and the 2022 US midterm elections saw a strong surge in the right-wing populist Republican representation in Congress, with former president Trump declaring his candidacy for the presidency in 2024. In 2023, it becomes clearer than ever that Europe needs to get the union’s defensive posture in order, being less able to rely on the increasingly fickle US political cycle and facing the risk that the US will entirely withdraw its old commitment to Europe, perhaps after a Ukrainian-Russian armistice.
“In a dramatic move, all EU members move to establish the EU Armed Forces before 2028, with the aim of establishing a fully-manned and deployable land, sea, air and space-based operational forces, to be funded with EUR 10 trillion in spending, backloaded over 20 years. To fund the new EU armed forces, EU bonds are issued, to be funded based on keys of each member country’s GDP. This drastically deepens the EU sovereign debt market, driving a strong recovery in the euro on the massive investment boost.”
A country agrees to ban all meat production by
“To meet the target of net-zero emissions by 2050, one report estimates that meat consumption must be reduced to 24 kg per person per year, compared with the current OECD average of around 70 kg. Countries most likely to consider the food angle on climate change will be those that have legally binding net-zero emissions targets. Sweden has pledged to reach carbon neutrality by 2045, while others like the UK, France and Denmark are aiming for 2050.
"But a carrot and stick approach rarely works, and in 2023, at
least one country looking to front-run others in marking out its
lead in the race for most aggressive climate policy, moves to
heavily taxed meat on a rising scale beginning in 2025. In
addition, it plans to ban all domestically produced live
animal-sourced meat entirely by 2030, figuring that improved
plant-derived artificial meats and even more humane,
less-emissions' intensive lab-grown meat technologies will have
to satisfy appetites to help save the environment and