As Donald Trump takes the helm of the world’s largest economy, next year is already set to be one of uncertainty and surprises, but Saxo’s list of outrageous predictions raises the bar for imagining what might happen.
In one plausible scenario, Trump slaps massive tariffs on all imports while slashing government deficits, cutting off the supply of dollars to the wider world and damaging the dollar’s function as a reserve currency.
This could lead to the dollar plummeting by 20% against major currencies and 30% versus gold, and to the crypto market quadrupling to more than $10trn.
This is not Saxo’s official forecast but is an example of something that could conceivably happen and would send shockwaves across financial markets, said chief macro strategist John Hardy.
The stage is set for dramatic currency movements elsewhere, too. With a new era of political stability in the UK and upheaval in Europe, the pound could rise through €1.27 – the level it traded at ahead of the Brexit referendum. A FTSE 100 rally would complete the picture.
Artificial intelligence is likely to be a dominant theme next year and Nvidia’s success could be turbocharged by its Blackwell chip. “The insatiable demand for the more powerful and yet less power-hungry Blackwell chips sees Nvidia taking the crown as the most profitable company of all time,” Hardy said.
Nvidia shares were trading at $138 on 2 December, up 187% year-to-date. Saxo envisions them soaring above $250 next year before falling back as “the market begins to question Nvidia’s potential to grab an ever-greater share of corporate profits and as unwelcome regulatory scrutiny on its monopoly status tempers the outlook,” he said.
As AI adoption gathers pace and data centres consume increasing amounts of electricity, US power prices and household utility bills could skyrocket, causing outrage.
Local authorities might respond by taxing and even fining the largest data centres to subsidise lower power prices for households, said Ole Hansen, head of commodity strategy.
Over the longer term, these developments could result in the doubling of natural gas prices and a boom in US investment in power infrastructure.
Tesla’s Megapack, a battery product designed and engineered for utility-scale projects, would garner more attention, Hansen said.
Another prediction related to Tesla is that exponential demand for electric vehicles could lead to the demise of OPEC. As people stop driving vehicles that guzzle petrol or diesel, OPEC’s daily production quotas might be rendered irrelevant.
“With some members already cheating production quotas to grab what income they can and export demand falling, a majority of members quickly realise the jig is up. Amidst the bickering and in-fighting, key members leave. This consigns OPEC to the ash heap of history,” Hansen said.
“Former members max out production to ensure market share, driving a large drop in oil prices.”
Moving on to healthcare, Saxo imagines an unprecedented breakthrough in 3D bioprinting technology, enabling researchers to print a fully functional human heart.
This development could lead to a surge in innovation and investment, reshaping the healthcare industry and leading to improved patient outcomes, as well as significant economic growth.
Going from a positive prediction to a black-swan event, a catastrophic natural disaster in the US could catch the insurance industry unawares, leading to the bankruptcy of a major firm.
Hardy said: “One of the largest US insurers significantly underestimated the insurance risks from climate change, leading to under-priced policies in the affected region. With insufficient reserves to cover claims and inadequate reinsurance to mitigate the costs of this extreme event, panic spreads across the entire industry.
“A crisis unfolds, prompting government-level discussions on whether to bail out the failing company and the other walking wounded in the industry to prevent widespread risk contagion.”
On the flip side, such a scenario could be positive for Berkshire Hathaway, which would have enough capital to weather the panic and would be able to gain market share.
Finally, the Chinese government has already kicked off an ambitious programme of economic stimulus measures and next year, it could go much further.
Saxo’s prediction involves China making a bold bet on reflation and committing to spend more than CNY50trn (about $7trn) on fiscal initiatives in the coming years.
Charu Chanana, chief investment strategist, said: “Much of the spending goes directly into consumers' pockets via e-CNY digital currency, so that it will be injected straight into the economy rather than to pay off debt. China also adds heavy doses of social engineering in its stimulus, incentivising companies to reduce working hours to improve quality of life.”
The wider market impacts of reflation in China include emerging markets outperforming developed markets, higher commodity prices globally and a stronger Chinese renminbi.