Outrageous predictions: ‘2015 is a great year for employment’

World Finance speaks to Saxo Bank's Chief Economist, Steen Jakobsen, to discuss the bank's predictions for the year

December 17, 2014
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Transcript

World Finance: So putting aside your outrageous predictions for 2015, what do you think the year ahead will look like?
Steen Jakobsen: If you had three inputs, energy prices, interest rates and currency, what would be the path of least resistance? Clearly the world is not functioning well with a strong dollar, so the top line for next year in terms of currency is lower dollar.

In terms of energy, the world right now is battling out whether this is inflation impact from low energy, or the increase in discretionary spending is more important. The analysts think discretionary spending is more important, the market seems to think that the disflation is more important. Energy needs to stabilise to be slightly higher.

I think 2015 is a great year for employment, it’s a great year for productivity, it’s a great year where we’ll turn around

In terms of the interest rates, we know for a fact that debt to GDP is rising, certainly in Europe, but all over the world. So low interest rates. So if you take the path of least resistance, it means a slightly weaker dollar, unchanged interest rates and a slightly more stable to higher energy. I think that’s exactly what happens, because at the end of the day water flows to the lower point. Gravity isn’t resisted even in these financial markets.

But I think in asset terms, the big play next year is to realise that being in so-called safe high yield plays is not going to work. Next year it’s about the transition from the 20 percent of the economy which is the listed companies and governments, into the real economy.

I think 2015 is a great year for employment, it’s a great year for productivity, it’s a great year where we’ll turn around, but first we need to get to that bad point in Q1/Q2.

World Finance: So how do you think we should approach the year ahead?
Steen Jakobsen: Prepare, rest well, train well, because 2015 is guaranteed to be more volatile, and I think as we come into 2015 in the WQ1, that will be exactly nine months since oil prices and the Europ started to fall. My rule of thumb is always nine months is the time it takes for a macro-impulse to work.

So be as I am: long fixed income, conservatively long the equity you need to own, and then as you come into Q1/Q2 next year, you need to be buying when everybody else will be selling.