2012: A year of great change

The EU crisis, public sector austerity and social tension will create the perfect storm in 2012
Saxo Bank, the online trading and investment specialist, in its Q1 2012 Financial Outlook believes that a perfect storm is pending. Pressures in the Eurozone, public sector austerity and social tensions will all conspire to create the storm, in which no nation will be left untouched and 2012 could be the most pivotal year by far since the global financial crisis of 2008.

The changes afoot could mean that 2012 will be a year for the optimists as there is potential that we might finally see the world start to head in the right direction again. The Bank believes that this time around in the EU, we may see a true systemic climax, with liquidity freezing over across the financial system and European equity markets dropping 25 percent or more. Among other changes, the Bank forecasts that bond yields, (both sovereign and corporate), will rise due to intense competition for capital, the USD and precious metals will benefit from continued risk aversion, and the UK will endure another 5 years of low growth, high unemployment and fiscal austerity. Although, the UK is expected to outperform the Eurozone next year, it will not be without its share of difficulties.

Steen Jakobsen, Chief Economist at Saxo Bank comments: “The perfect storm is coming but there is no need to panic. We are optimistic that 2012 will be a year of great change. But before we get there, we’ll see yet another quarter of extending-and-pretending from the policy makers that will most likely prove counterproductive and lead us quickly to a turning point and hope for the balance of 2012.”

“The world economy eased off the accelerator in 2011 as foreign trade growth and government stimuli fad­ed and the prospects for 2012 are for more of the same. The developed economies will struggle with weak domestic demand as austerity programmes and soft labour markets take their toll while emerg­ing economies see foreign trade ease, meaning re­liance will have to be more on domestic demand, which will see central banks swinging into action and loosening monetary policy. Overall, we look for world growth to slow further in 2012 to 3 percent”.

The full 2012 Outlook includes the following analyses:
  • Premise for 2012: A year of great change
    • EU crisis
    • Public sector austerity
    • Social Tension
    • Economic growth
    • Equity markets
    • Interest rates
    • Currencies
    • Alternative Scenarios
  • Market Comment – A perfect storm is brewing
  • Macro Outlook: Navigating the rough seas of the perfect storm
  • Equity: Accept the future is uncertain and embrace it
  • FX: The cong remains (mostly) the same
  • Monetary Policy: Major central banks
  • Asia Outlook: Fasten your seatbelts, we are about to land
  • Commodities: Market braced for headwinds
  • FX Options: More upside potential for volatilities

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