We’re still not done looking back at 2013 and sifting through all the 2014 outlooks published by Wall Street.
So were a little shocked to see Societe Generale’s Kit Juckes publish a note titled “The 2015 Outlook.”
That was not a typo.
Going in to 2015, the question on top of his mind is this: “Will growth keep asset markets happy or will dismantling the easiest monetary policy since the 1920s bring the economic recovery to a dismal end?”
There’s no easy answer so he’s approaching it with “trepidation.” Of course to project out into 2015, he’s working off his assumptions for how 2014 panned out.
Here’s what we managed to cull from Juckes’ 2015 preview.
In terms of the global economy, he works off the assumption that there had been a divergence between the US and Eurozone, with the former outperforming. And this looks likely to continue. He sees 2014 ending with U.S. unemployment down to 6.3% and expects this to fall below 6% in the first half of 2015.
Rising wage growth in the U.S. will cause concern among bond investors in 2014, which will help send yields higher. He also expects the difference between US and European five-year yields to widen further in 2015 as the ECB is forced to ease policy even as the Fed moves to tighten faster than expected.
He sees the dollar rally to get going in 2015. “As the US economic recovery continues the Treasury curve is re-pricing how fast it expects the Fed to hike rates, starving currencies which have been reliant on yield-hungry investors looking ever further afield for returns we’re looking for a further rise in TIPS yields in 2015 and that should see the dollar continue to make gains.”
Turning to Japan, we could see the yen could push towards 115-120 in 2015 and this could help Japan which lags the U.S. and Eurozone in export volumes. “A weaker yen helps, a pickup in nominal GDP helps, but demographics don’t and the debt is a Sisyphean burden that may drag Japan down again in due course.”
Juckes also expects the pound to rally against the euro in 2015.
Oh and in case you were wondering, Juckes assumed 2014 outcomes include Germany winning the World Cup.