10 Outrageous Financial Predictions from 2020

Before the time of masks, quarantine and abhorrence for hand-shaking, the Danish investment bank Saxo Bank published ten “unlikely but under-appreciated” financial events that might occur during 2020. If there was ever a year for outrageous predictions to come true, 2020 seems like it could have been the perfect one! I’m sure, however, that those making them couldn’t have fathomed the topsy-turvy year that unfolded. Let’s see how their tongue-in-cheek predictions have held up…

1. Artificial intelligence becomes a dunce

Wrong!

The prediction was that diminishing returns on the performance of AI microchips would tank the SOX Index. The iShares SOX ETF did take a Covid-induced Springtime tumble, losing about 25% of its value. That’s been the only major blip, however, as the index has since continued to grow in value. At the time of writing, it was up 60% over the course of the past year.

The performance of the iShares PHLX Semiconductor ETF during 2020. Other than a brief dip in the Covid Crash, it’s been virtually all rise.

2. FAANG’s lose their bite

Wrong!

The idea was that stagflation would favour value stocks over growth stocks. They predicted that the iShares MSCI Value Factor ETF would outperform FAANG stocks by 25%. The performance of the ETF this year has left a lot to be desired:

The performance of a hypothetical $10,000 invested in the iShares Value Factor ETF. You’d be coming to the end of the year without significant loss or gain (-0.32%), but you’d have “enjoyed” a stomach-curdling ride along the way.

By comparison, the share prices of Facebook (41%), Amazon (76%), Apple (80%), Netflix (65%) and Google (32%) all rose. The Goliaths definitely won this round.


3. ECB 180 gives EuroStoxx a leg up

Wrong!

The European Central Bank was supposed to about face and reverse its endorsement of negative interest rates. The rate has instead remained both static and negative. Furthermore, an investment in the EuroStoxx index would have lost ~20% of its value. A far cry from the vaunted 30% increase 2020 was supposed to bring!


4. Big bad oil and gas outperform clean and serene energy companies

Wrong!

A spectacular misreading of the prevailing wind! Haven’t they heard that green is the new black? An iShares clean energy ETF has grown over 100% in the last year; the trend towards greener, cleaner investing continues. Conversely, the price of popular oil and gas ETF’s has dropped nearly 30%.

The performance of the iShares global clean energy ETF (blue line) against the SPDR Oil & Gas Exploration & Production ETF (green line) during 2020. Graph from Yahoo finance.

5. Loss of mojo leaves South Africa feeling not at all Rand-y

Halfway there!

They nearly got this one! The thought was that the Rand would suffer as the South African government bailed out utility company ESKOM. The currency did indeed slide to just shy of 20 Rand to the USD, but has since recovered such that it’s almost at its end-of-2019 value.

The exchange rate between South African Rand and US Dollars. At its zenith the exchange rate closed in on 20 Rand to the US Dollar, but this has receded to the levels seen nearly a year ago. Graph from xe.com.

6. Trump puts America first with new taxes

Wrong!

Predicting the next actions of Donald Trump is probably like trying to herd cats – impossible. Both an America First Tax and a rise in the yield of US 10-year inflation-protected treasuries failed to materialise. I can’t say that Trump was a total torpedo to the American economy in 2020 but, as we’ll see the back of his presidency soon, the less said about the narcissistic toerag the better.


7. Swedish stimulus sends SEK soaring

Halfway there!

Another forecast on FX nearly comes true. Although the foreseen “steep” rise in the value of the Krona hasn’t quite come to fruition, there’s definitely been a gentle slide in the right direction since the announcement of a 2021 budget boost by the Swedish government.

The exchange rate of Swedish Krona to US Dollars. From a nadir of over 10kr to the USD, the August announcement of a 2021 spending spree has seen the Krona rise in value. At the time of writing, it was nearing 8kr to the Dollar. Graph from xe.com.

8. Biden rides wave of women and millennials to victory; Big Health and Pharma implode

Halfway there!

Joe Biden did indeed win the US Election. The statistics seem to support the idea that he benefited from more votes by female voters (a 56% majority compared to the much narrower gap amongst male voters) and those under the age of 30. On the financial front, neither Big Healthcare nor Big Pharma took the 50% hit that was foretold.


9. Hungary “does a Brexit” – the Forint falters

Wrong!

Hungary remains a part of the EU, though with their recent veto of the EU’s budget and recovery package, there’s a non-zero chance of a Magyar migration out of EU circles in 2021. The Forint has decreased in value. Although 1€ now gets you 355Ft, rather than the 330Ft it would have done at the start of the year, this is still shy of the predicted 375 EURHUF spike that was predicted.


10. Novel Asian digital reserve currency decimates US Dollar

Wrong!

This prediction of a new Asian digital reserve currency, which reduces the US Dollar index by 20%, hasn’t come true. The US Dollar index has dropped by 8%, but not necessarily as a result of such competition. After my research into cryptocurrencies, I do think that the rise of national digital reserve currencies is highly likely. Indeed, an Asian digital reserve currency will invariably compete with the US Dollar.


Final score: 1.5 / 10

Verdict: Covidiots

TTFN,

Mr. MedFI

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