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Jakobsen: How to trade the coming US downturn
Forget what you think you know about any recovery in the US. Steen Jakobsen says the unemployment rate will rise, the housing market will flat line and we'll get more QE not less. Saxo Bank's Chief Economist says there's been a fundamental misreading of America's true economic condition. He expects close to zero growth in 2014 despite most surveys pointing to a healthier upswing.
Because of that, Jakobsen says we're going to see more action from the US Federal Reserve. That could give a "final" lift to equities but could weaken the dollar. He believes now's the time to get into fixed income which, he says, is extremely cheap right now. However, as we enter the fourth quarter after the German elections we'll see more of an event risk with Greece and spending cuts in the US will start to bite.
Despite all the market talk of the Fed tapering its bond buying programme, Steen says we're likely to see much more specific guidance on a month by month basis. It will have to persuade the markets that interest rates will remain low for a long time to come and they could do that by exploiting the excess reserves currently held at the central bank.
02:37 minutes
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