Saxo Bank Outlook 2011: Bubbles, bulls and bears... Oh my!

Saxo Bank, the online trading and investment specialist, in its yearly Financial Outlook believes 2011 will be a promising year for recovery. Positive trends from the latter half of 2010 will continue for the beginning of 2011. Particularly, the first half of the year is bound to present further upside surprises to company earnings. However, the flipside is that earnings surprises will likely be fewer and farther between by the second half of 2011 as companies struggle to maintain margins in an environment where end demand and revenue growth are still sluggish while input costs have spiked higher. 

The Copenhagen-based bank also predicts that overall growth in the U.S economy will accelerate and end the year with a growth rate of 2.7 per cent. On the other hand, the Chinese economy will likely slow down and realize an 8 per cent year-on-year growth, falling short of widely prevalent 10 per cent predictions. The Bank also fears that Spain could be the next ‘pig to roast’ should Portuguese debt come under attack. Finally, 2011 will be a year of stagnation for the UK, although the economy will bounce back in the long term, but perhaps not until 2012.

Saxo Bank expects volatility to go nowhere but up, especially considering the tense dynamics of the global macroeconomic picture.

Chief Economist at Saxo Bank, David Karsbol comments: “While the ECB, Fed, BoJ and BOE will all remain in easy money mode, China and other major emerging market economies will fight for their lives to subdue potential asset and credit bubbles in 2011. What we need to do now is to restore trust in the financial system, through tougher future regulation and punishment of the Too Big To Fail banks. Taxpayers will have to pay the majority of failing banks’ bills arising from past indiscretions, but it should be made clear that they will be left to their own devices in future. Even as governments raise taxes and cut spending, the great public bond bubble moves one year closer to its eventual confrontation with fiscal reality.”