If you’ve read Saxo Bank’s yearly Outlooks over the last few years, you’ll know we don’t hold back in our annual attempt to predict the black swan sightings in global markets for the year ahead. Remember though, these predictions are made more in an attempt to provoke thought than at accuracy! This year, we have to mention our predictions are a bit on the pessimistic side – so let’s hope that we’re very wrong with the gloomiest of them.
1) Ron Paul elected President of the United States
We’re starting with the most outrageous first! One would imagine that a party with the least popular president to inhabit the White House – ever – wouldn’t stand a snowball’s chance in Texas of getting a new candidate elected to the presidency. But Ron Paul is no George Bush Jr., even if he is a Republican like Bush and is from Texas like Bush. His libertarian, anti-war platform is about three standard deviations away from the platform of any other Republican candidate — or even Hilary Clinton, for that matter. Paul’s share in the Republican candidate polls has rocketed from 1 % to 6% in the space of a few months and there is the best part of a year to go until the election. As should be clear from this year’s Outlook, we are quite negative on the US economy in 2008. A general slowdown and stock market turmoil should increase the odds of a Ron Paul nomination as he has been the only candidate to speak frankly about the budget and
current account deficits and the dollar crisis.
2) S&P500 falls 25% from its 2007 high to 1182
Why 1182? That would be an exact 25% drop from the 1576 high the S&P500 index reached in mid- October of this year. History shows that a stock market drops 15-30% when housing markets fail. “Easy Al Greenspan” and “the slice and dice any manner of junk and pass on the risk to your clients” investment banking paradigm triggered the biggest housing bubble in US history. The unwind from the height has already been severe – by some measures the most severe since the Great Depression – but it has further to go. So we are daring to forecast that the fall in the major ...
