Saxo Bank’s 22 Calls for 2022

Illustration of people raising fists on sunbeams background, Vector EPS 10 revolution stock illustrations

https://www.home.saxo/insights/news-and-research/thought-leadership/outrageous-predictions

The predictions focus on a series of unlikely but underappreciated events which, if they were to occur, could send shockwaves across financial markets:

  1. The plan to end fossil fuels gets a rain check
  2. Facebook faceplants on youth exodus
  3. The US mid-term election brings constitutional crisis
  4. US inflation reaches above 15% on wage-price spiral
  5. EU Superfund for climate, energy and defence announced, to be funded by private pensions
  6. Women’s Reddit Army takes on the corporate patriarchy
  7. India joins the Gulf Cooperation Council as a non-voting member
  8. Spotify disrupted due to NFT-based digital rights platform
  9. New hypersonic tech drives space race and new cold war
  10. Medical breakthrough extends average life expectancy 25 years

As culture wars rage across the world, it’s no longer a question of if we get a socioeconomic revolution, but a question of when and how. But which revolutionary prediction do you think is most likely?

Saxo CIO Steen Jakobsen summarizes the theme for 2022 Outrageous Predictions is Revolution.

There is so much energy building up in our inequality-plagued society and economy. Add to that the inability of the current system to address the issue and we need to look into the future with the fundamental outlook that it’s not a question of whether we get a revolution, but more a question of when and how. With every revolution, some win and some lose, but that’s not the point—if the current system can’t change but must, a revolution is the only path forward.

A culture war is raging across the globe and the divide is no longer simply between the rich and the poor. It’s also the young versus the old, the educated class versus the less educated working class, real markets with price discovery versus government intervention, stock market buy-backs versus R&D spending, inflation versus deflation, women versus men, the progressive left versus the centrist left, virtual signalling on social media versus real changes to society, the rentier class versus labour, fossil fuels versus green energy, ESG initiatives versus the need to supply the world with reliable energy—the list goes on.

What’s interesting for me, having done this Outrageous Predictions list for twenty years, is that all of the above issues point to a cycle ending rather than a continuation of more of the same. Post-pandemic (well, mostly) the market is hoping that things will continue as before, but as an old mentor of mine used to say, when I answered one of his questions with “I hope”: “Listen, son, save hope for church on Sundays, and come back when you have something more concrete.” The year 2022 is likely to see far less of what markets are hoping for and far more in the way of volatility as revolutionary movements kick into gear that challenge the status quo as we grope our way towards a new paradigm. Some of these movements will get things right, some of them will make mistakes, but we need to get started. Pretty much everything needs to change if we are to achieve zero emissions, less inequality, stable energy and importantly, more productivity.

2021 was a year in which we thought we could firmly put Covid behind us, but as 2022 rolls into view, we’re simply not there yet. It was a year with unprecedented fiscal transfers, especially to lower-income households, which created excess demand in a geopolitically and supply chain–fragmented world. The physical world simply became too small to absorb the good, if misguided, intentions of politicians and central banks to keep the economy on an even keel. Now we find ourselves with an energy crisis on our hands—and that’s not an outrageous call. But how we deal with it could create both policy mistakes and fundamental changes. A cold winter, for example, could spark a counter-revolution against the current alternative energy narrative, requiring that we reconfigure our expectations around how quickly we can abandon fossil fuels (Outrageous Prediction number 1 for 2022!) and even reclassifying nuclear energy as green. Doing anything else is simply not viable if we want to avoid a collapse in the real economy.

We do realise that the Revolution theme for OP 2022 can create negative associations. To many of us, the word Revolution calls forth the 1789 French Revolution with its call for “Liberty, Equality, and Fraternity”, but also the Russian Revolution and its “smash the capitalists” principles.

But our intent is the broader definition of revolution: not the physical overthrowing of governments, but eurekalike moments that trigger a change of thinking, a change of behaviour and a rejection of the unsustainable status quo. Hopefully, each of the Outrageous Predictions echoes that general point, with a couple of the revolutions triggered by the “involuntary” implications of technical progress: hypersonic missiles and longevity therapy. We need more liberty from governments in some areas, like a less heavy-handed monetary policy and the moral hazard of unproductively backstopping markets it brings. And we need more regulation in others, like avoiding the dangers of a hyper-financialised economy, too-powerful monopolies and inequality. Most urgently, we need to provide a brighter outlook for the world’s young people and better cooperation among nations instead of the present trend away from globalisation and multilateral institutions.

We collaborated globally on Covid vaccines in 2020 and 2021. Now we need a new Manhattan Project–- type endeavour to set the marginal cost of energy, adjusted for productivity, on the path to much lower levels while eliminating the impact of our energy generation on the environment. Such a move would unleash the most significant productivity cycle in history: we could desalinate water, make vertical farms feasible almost anywhere, enable the leap to quantum computing, and continue to explore new boundaries in biology and physics.

Remember that the world is forever evolving if at varying speeds, while business and political cycles are always finite. We are betting that in 2022 the speed of evolution kicks up a few notches into a revolutionary state as a new cycle gets under way. ‘Change is good’ needs to be the new mantra, or at minimum: “trial and error”. Let’s at least try and err some more rather than trying to forever kick the can down the road!

Finally, we must emphasise our annual caveat, that these Outrageous Predictions should not be seen as our official view on the market and politics. This year, more than ever, we’re trying to provoke you and ourselves to think outside the box and to engage in discussing the important topics we raise. Let the fun, and the future, begin.

*  *  *

The plan to end fossil fuels gets a rain check

Summary: Policymakers kick climate targets down the road and support fossil fuel investment to fight inflation and the risk of social unrest while rethinking the path to a low-carbon future.

Facebook faceplants on youth exodus

Summary: The young abandon Facebook’s platforms in protest against their mining of personal information for profit; the attempt by Facebook parent Meta to reel them back in with the Metaverse stumbles.

The US mid-term election brings constitutional crisis

Summary: The US mid-term election sees a stand-off over the certification of close Senate and/or House election results, leading to a scenario where the 118th Congress is unable to sit on schedule in early 2023.

US inflation reaches above 15% on wage-price spiral

Summary: By the fourth quarter of 2022, US CPI inflation reaches an annualized 15% as companies bid up wages in an effort to find willing and qualified workers, triggering a wage-price spiral unlike anything seen since the 1970’s.

EU Superfund for climate, energy and defence announced, to be funded by private pensions

Summary: To defend against the rise of populism, deepen the commitment to slowing climate change, and defend its borders as the US security umbrella recedes, the EU launches a bold $3 trillion Superfund to be funded by pension allocations rather than new taxes.

Women’s Reddit Army takes on the corporate patriarchy

Summary: Mimicking the meme stock Reddit Army tactics of 2020-21, a group of women traders launch a coordinated assault on companies with weak records on gender equality, leading to huge swings in equity prices for targeted companies.

India joins the Gulf Cooperation Council as a non-voting member

Summary: The world’s geopolitical alliances will lurch into a phase of drastic realignment as we have an ugly cocktail of new deglobalising geopolitics and much higher energy prices.

Spotify disrupted due to NFT-based digital rights platform

Summary: Musicians are ready for change as the current music streaming paradigm means that labels and streaming platforms capture 75-95 percent of revenue paid for listening to streamed music. In 2022, new blockchain-based technology will help them grab back their fair share of industry revenues.

New hypersonic tech drives space race and new cold war

Summary: The latest hypersonic missile tests are driving a widening sense of insecurity as this tech renders legacy conventional and even nuclear military hardware obsolete. In 2022 a massive hypersonic arms race develops among major militaries as no country wants to feel left behind.

Medical breakthrough extends average life expectancy 25 years

Summary: Young forever, or for at least a lot longer. In 2022, a key breakthrough in biomedicine brings the prospect of extending productive adulthood and the average life expectancy by up to 25 years, prompting projected ethical, environmental and fiscal crises of epic proportions.

Read the full report below:


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