Saxo Bank’s Real Forecast For 2016; Mish Comments And Projections

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.