Public Relations, Saxo Bank
26 March 2015

Q2: Saxo Bank warns investors to price in the limits of “planned economy” model

​​​Saxo Bank, the online multi-asset trading and investment specialist, has published its Q2 outlook warning investors of the end to the current cycle of ”ex...

​​​Saxo Bank, the online multi-asset trading and investment specialist, has published its Q2 outlook warning investors of the end to the current cycle of ”extend and pretend” as the planned economy model of the past eight years comes to breaking point.

Saxo Bank Chief Economist Steen Jakobsen’s Q2 outlook for the global economy is dour. He believes that the current cycle of extend and pretend is nearing its end. For too long, policymakers and central banks have bought time by pumping asset markets with zero interest rates and QE, forcing investors to take greater risks on the lack of alternatives and allowing companies to boost share prices with huge buybacks, often with cheaply borrowed funds. From Q2, look for an increased risk for asset re-pricing and a period of zero or even negative returns.

Predicting a rupture with the past, Steen Jakobsen, Chief Economist, Saxo Bank, said: “The global market is closer to the Soviet Union in 1989 in its political and economic structure than to a freely traded market. The inability to move all the printed money into the real economy remains the central issue and solution to the economic dilemma. The ECB’s move into negative rates in 2014 could turn to be the catalyst for change, especially since 35% of all European government debt is now trading at negative yield.

”If you are a company, it is difficult to keep sales volumes going up when your consumers are not taking part in the recovery. The conclusion should be that an economic system which does not allocate capital to the highest marginal cost of capital, and which continues to support the one per cent versus the 99 per cent ultimately comes full cycle to a point where the expected return of everything is zero again.”

Against this backdrop, the bank publishes its outlook for the market and and its key trading ideas for the next quarter.


  • Commodities
    The collapse of the oil price in the last six months has stunned the global economy with the implications of a near 50% fall in the major benchmarks still unwinding says Ole Hansen, Saxo’s Head of Commodity Strategy. This environment has left the market open for some contango opportunities in Q2, expectations based on the premise that prices will rise in the future, especially in the US market. In Q2, focus will be on restoring a proper balance between supply and demand of the black stuff.

    Saxo Bank expects the gold price will continue to depend on the dollar, the direction of US bond yields and the timing of the first US rate hike with no major positive impact expected.

    Trade 1: A bullish exposure to precious metals
    Trade 2: Shorting WTI crude
  • Macro
    ​The tailwind from lower energy prices, a weaker euro, and an overall less weak economy result in a meaningful upward revision to euro area growth to 1.5% in 2015. “In the US, I maintain the outlook for growth of around 3% while I remain below-consensus with a 6.7% forecast for China”, says Mads Koefoed, Saxo Bank’s Head of Macro Strategy.

    ”There are plenty of event risks in Q2 waiting to raise volatility in the markets. The Greeks may find themselves with their backs against the wall again in late June and in the US, the FOMC is preparing for the first rate hike since 2004 with June and September the most obvious candidates.” adds Koefoed.

    Trade 1: Stay long European high-yield corporate bonds on ECB QE
    Trade 2: Buy long-term US Treasuries on FOMC rate-hike postponement
  • FX
    In currencies, Head of FX Strategy John Hardy is looking for potential mean reversion in the extremes of NZD strength and SEK weakness in Q2. Elsewhere, the USD rally looks set to continue in Q2, though the pace is likely to slow significantly after the incredible advance of the previous six months. And the JPY outlook is a big question mark, as USDJPY has remained in a technical limbo in late Q1, which is the end of Japan’s financial year. GBP may stay under pressure as the elections approach in May.

    Trade 1: Shorting NZD vs. AUD and USD
    Trade 2: Shorting GBPSEK

  • Equities
    Peter Garnry, Saxo Bank’s Head of Equity Strategy expects capital to be flowing again into Europe, amid an improved economic outlook, with equities set for their best start since 1995 and are already up 14 per cent year-to-date. One of the assets that has already benefitted a lot from the current trajectory of monetary policies and improving macro conditions is real estate, which is up 20 per cent this year.

    Tailwind is the word for the European equities in Q2 and 2015 could likely be a déjà vu of US equities in 2013 when they rose 32 per cent. This means that European equities could return an additional 15 per cent on top of their impressive start to the year.

    Trade 1: Long Airbus – buying Airbus
    Trade 2: Long Colombia – buying the Global X MSCI Colombia 20 ETF

To access the full list of trade ideas produced by Saxo Bank analysts which accompany the Q2 2015 outlook, please click here:


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