Monday served as another smackdown for investors who are banking on a Goldilocks economy and a less aggressive Fed.
Some are now not ruling out a Grinch-like turn from the central bank — a 0.75% hike next week instead of the 0.50% markets have been pinning hopes on — following strong data on services, jobs and wages.
It all goes along with the theme of 2022 — expect the unexpected. The relief of moving out of a crippling pandemic was quickly replaced by the biggest war on Europe’s shores in decades, that sparked worldwide inflation surges.
What comes next is anyone’s guess and that brings us to our call of the day via Saxo Bank’s annual “Outrageous Predictions” for 2023.
While some of these will sound crazy, note that the Saxo team, led by Chief Investment Officer Steen Jakobsen, have nailed a few wild prophecies in the past decade. Those include: a Brexit prediction in 2015, a 25% drop for the S&P 500 from its 2007 high in 2008, a tripling of Bitcoin’s value forecast in 2017.
The focus for 2023’s prediction is that “a return to the disinflationary prepandemic dynamic is impossible because we have entered into a global war economy, with every major power across the world now scrambling to shore up their national security on all fronts; whether in an actual 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,” says Jakobsen.
As for those predictions, here we go:
- Gold crosses $ 2,075 then rockets to $ 3,000 on unstoppable inflation. “Fed policy tightening and quantitative tightening drives a new snag in U.S. treasury markets that forces new sneaky ‘measures’ to contain Treasury market volatility that really amounts to new de facto quantitative easing,” says Saxo. And China’s end of zero-COVID drives up demand, commodity prices and inflation.
- Widespread price controls to cap official inflation due to war economy mentality. “In 2023, expect broadening price and even wage controls, maybe even something like a new National Board for Prices and Incomes being established in the U.K. and the U.S.,” said Saxo. Market fallout? Fuel for gold’s GC00, +0.51% climb.
- There’s a new reserve asset in town. Non U.S.-allied countries move away from the U.S. and IMF to create an “international clearing union (ICU) and a new reserve asset, called the Bancor (currency code KEY)” that borrows from economist John Maynard Keynes idea of resisting U.S. power over the international monetary system. Nonaligned central banks slash U.S. dollar reserves, Treasury yields soar and the dollar DXY, -0.22% drops 25% against a basket of currencies that trade with Bancor.
- Japan pegs USDJPY to 200. Pressure intensifies on the already weak yen USDJPY, -0.40% into 2023 as currency intervention fails and inflation soars. The government resets the financial system, erasing all debt, recapitalizing banks, as trillions of yen return to Japan shores. But the yen still weakens by year-end.
- A $ 10 trillion-dollar Manhattan project. A team of major tech leaders form a mega research-and-development effort for energy infrastructure and ground-breaking technologies — the Third Stone. Companies tied to the project soar in an overall weak environment for investing.
- Tax haven ban kills private equity. The OECD launches a full ban on the biggest tax havens in the world in 2023 and in the U.S., carried interest tax as capital gains is shifted to ordinary income. It’s a body blow for private equity and venture capital — the valuation of publicly listed private-equity firms fall 50%.
The rest of their predictions are here, such as the formation of an EU Armed Forces in 2023 and an “UnBrexit” referendum.
Read: Why Monday’s stock-market rout should be a wake up call for investors
The markets
MarketWatch
Stock futures ES00, -0.16% are inching up, with Treasury yields TMUBMUSD10Y, 3.552% TMUBMUSD02Y, 4.370% steady, the dollar DXY, -0.22% flat and oil CL.1, -1.29% BRN00, -1.28% firmer.
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The buzz
BioVie stock BIVI, -5.10% is climbing after positive results from the clinical-stage biopharmaceutical company on a drug for Parkinson’s and Alzheimer’s.
NRG Energy NRG, -0.99% agreed to buy Vivint Smart Home VVNT, -4.67% in a $ 5.2 billion deal. Vivint shares are soaring.
MEI Pharma MEIP, -5.74% shares tumble after drugmaker said it would stop developing cancer treatment zandelisib outside of Japan and announces job cuts. Herbalife shares HLF, -1.02% are down 10% after an offering of convertible notes
Powell Industries POWL, +2.66% is up 9% after the electrical equipment maker’s well-received results and new orders. Within software Sumo Logic SUMO, -7.33% and GitLab shares GTLB, -7.12% are surging on upbeat results and forecasts.
Layoffs extending beyond tech? PepsiCo PEP, -1.38% is reportedly cutting hundreds of workers at its North American headquarters.
Home builder Toll Brothers TOL, -2.15% is reporting results after the close.
October trade deficit data is ahead.
The U.S. and EU are reportedly considering fresh steel and aluminum tariffs on China to fight carbon emissions.
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The chart
Headed into the holidays, consumers are using savings and credit, says a team of Jefferies analysts led by Corey Tarlowe. “The savings rate continues to trend lower and credit card balances are growing +15% Y/Y. We believe these trends indicate that the consumer is stretched.”
Against this backdrop, they like Costco COST, -1.19%, Dollar General DG, +0.81%, Target TGT, -5.62% and Walmart WMT, -1.02%.
FactSet/Jefferies
The tickers
These were the top-searched tickers on MarketWatch at 6 a.m.:
| Ticker | Security name |
| TSLA, -6.37% | Tesla |
| GME, -7.12% | GameStop |
| AMC, -8.81% | AMC Entertainment |
| NIO, -2.51% | NIO |
| BBBY, +0.28% | Bed Bath & Beyond |
| AAPL, -0.80% | Apple |
| APE, -4.44% | AMC Entertainment Holdings preferred shares |
| COSM, +6.54% | Cosmos |
| AMZN, -3.31% | Amazon.com |
| MULN, -4.65% | Mullen Automotive |
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