A spike in Japanese inflation, a U.K. housing crash, a Chinese currency devaluation and Mario Draghi quitting his job at the European Central Bank (ECB) are just some of the extreme predictions Saxo Bank has offered for the coming year.
Headquartered in Copenhagen, the investment bank has been publishing its gloomy annual prophecies for over a decade. While Saxo Bank isn't completely serious with its far-out calls, conceding they are "relatively controversial," the firm does believe that imagining the worst could help investors navigate any real-life turmoil.
—By Matt Clinch
First published 10 Dec 2014
"We are in for a rollercoaster ride in 2015. Tangible assets and production sit at all-time lows. Paper money investment has crowded out productive capital while societies are dominated by hairdressers and bankers. We're losing the art of manufacturing," Steen Jakobsen, the chief economist at Saxo Bank, said in the report released on Wednesday morning.
"Meanwhile the power of the US of A is waning as China rises and when the superpower pecking order changes, volatility and war ensue."
More "underhanded attacks" on e-commerce's largest players is one of the major predictions by the Danish forecasters. Apple's iCloud platform, Target, Home Depot and JPMorgan are just some of the companies that fell victim to hackers last year, but Saxo Bank believes that these will become "even more widespread and aggressive."
Online giant Amazon.com will suffer a decline of 50 percent of its stock price, it said, adding that it would not necessarily need to be hacked itself to see a shift in sentiment and lower growth rates.
More crystal ball-gazing by the bank sees a prediction that the U.K. will experience a housing crash with prices falling as much as 25 percent in 2015. The country has been singled out as one of the major recovery stories after the global financial crash of 2008 and government policy and central bank stimulus has helped annual house prices rise around 10 percent for the last two years.
It also sees an outside chance of Japanese inflation spiking to at least 5 percent next year, with Jakobsen saying that quantitative easing (QE) in the country threatens to become an "out-of-control, inflation-stoking missile."
A Chinese yuan devaluation of around 20 percent could also be on the cards, according to the bank, as well as another Russian default, an Icelandic volcano erupting and a surge in cocoa prices.
It also warns on the U.K. moving nearer to an exit from the European Union and says that calls from Matteo Renzi, the Prime Minister of Italy, could lead to Mario Draghi returning home to lead the reform process with Jens Weidmann, the current president of the German Bundesbank, replacing him at the helm of the ECB.
While these black swan scenarios might seem a little beyond belief to most investors, the bank has managed to get some predictions right in the past. In last year's outlook, it boldly estimated that lofty valuations would mean big technology stocks like Amazon, Netflix, Twitter, Pandora Media and Yelp would wake up to a "nasty hangover" in 2014. Amazon's share price is currently down 21.6 percent year-to-date, Netflix is down 6.6 percent, Twitter is down 41 percent, Pandora Media is down 31 percent and Yelp has fallen 23.5 percent.
It also said that Germany would fall into a technical recession, posting two consecutive periods of negative growth. The euro zone powerhouse narrowly avoided this in November by expanding 0.1 percent in the last period after contracting in the second quarter of 2014.
Saxo Bank also predicted last year that Brent crude would drop below $80 per barrel – something which became a jaw-dropping reality in 2014 after the price slumped by around 40 percent.
Saxo's Jakobsen told CNBC he didn't have another prediction on where the price would be at the end of 2015 after the dramatic fall. Nonetheless, he said that his own personal prediction, aside from the ten released by Saxo Bank, would be that the U.S. government would look to bailout its energy sector with oil prices trading near five-year lows.
"The U.S. energy sector is clearly important," he said. "They are paramount to the long term strategic issues of the U.S. being independent on oil."