Page 36 - DIY Investor Magazine | Issue 36

Dec 2022 36
DIY Investor Magazine ·
2023 OUTRAGEOUS PREDICTIONS: THE WAR ECONOMY
Steen Jakobsen, CIO of Saxo, the online trading and investment specialist, has announced its 10 Outrageous Predictions for 2023; they focus on unlikely but underappreciated events which could send shockwaves across the financial markets as well as political and popular cultures.
They are a thought experiment, considering what is possible, if not necessarily probable, and occasionally, they come true – see correct Outrageous Predictions
All big market moves are brought about by something outrageous; in a world where central banks and governments are set to lose their battle with inflation.
Commenting, Jakobsen said: ‘This year’s Predictions argue
that any return to the disinflationary pre-pandemic dynamic
is impossible because we have entered into a global war economy, with every major power scrambling to shore up their national security; whether in a 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.’
THE WORLD AT WAR
This year’s Outrageous Predictions are inspired by similarities between Europe today and the state of the continent in the early c20th. In 1910, Norman Angell’s ‘The Great Illusion’ said there was no way Europe could become embroiled in a serious war again because of mutually beneficial trade and prosperous peace. Within ten years, Europe lay in ruins.
Fast forward to 2022, the situation rhymes; shocked by the Russian invasion of Ukraine, few could understand why Putin would risk war casualties and consign his country to economic hardship after two decades of booming and highly profitable export-driven trade, mostly in extractive commodities.
‘THE RISK IS THAT MARKETS WILL PROVE AS OUTRAGEOUS AS EVER IN 2023’
Ukraine brought a war economy mentality to Europe on a scale not seen since 1945; not just about inadequate military capabilities, but also an industrial, Germany-centred model, rendered existentially challenged by Europe cutting itself off from cheap and plentiful Russian oil and gas.
Three Predictions for 2023 look at how Europe may respond, one eyeing the creation of an EU Armed Forces, another spotting the political dysfunction in France and accelerating the next existential crisis for the EU. Finally, UK could find itself far too small to remain an independent actor in an abruptly much bigger world; Saxo outrageously predicts an ‘UnBrexit’ referendum next year.
It also predicts a conference to agree a new reserve currency as any country without a long-standing military alliance with the US will find it unacceptable to remain vulnerable to the weaponisation of the global USD system.
‘A WAVE OF STUPEFACTION THROUGHOUT FRANCE, AND SETTING UP THE LATEST EXISTENTIAL CHALLENGE TO THE EU’
If Saxo’s thesis proves correct in 2023, then persistent inflation is expected; at even half of the peak 2022 rate by late next year, outrageous outcomes are a guarantee.
Investors could risk over-estimating the likely recession’s positive impact on inflation; with or without a housing and credit recession, a nation’s need to invest in the new priorities of the war economy – from long-term energy supplies to reshoring production - will ensure a tilt toward more inflation risks.
The Outrageous Predictions 2023 publication is available here with headline summaries below: