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Saxo Outlook Q3

Coronavirus continues to infect markets

Written by Ronald Veerman | 5 minutes
THU 02-07-2020

Although international stock markets have risen sharply recently, the corona crisis threatens to haunt the economy and financial markets for years to come. Markets will continue to be under pressure by the rollback of globalisation and a worrying zombification of our economy, where countries and companies with trillions of loans are kept on their feet.

That's according to Steen Jakobsen, Saxo Bank's chief economist, in the investor bank's Q3 Outlook, which is published today. In addition to operating in 170 countries, Saxo Bank has also been the parent company of BinckBank since last year.

According to Jakobsen, tackling the corona crisis risks being more damaging to the economy than the virus itself. "The crisis has led to mistrust, selfishness and protectionism plus an aversion to globalisation, where international supply chains are suddenly under pressure and – more expensive – local production is back in place"

 

State capitalism threatens free market

Saxo Bank's economist is even more concerned about the way central banks and governments have come to the rescue of weak parts of their economy. "The bail-out policy, which currently supports everyone and everything, increases the economic risks and can lead to the end of the free market as a driver of our growth"

Jakobsen is therefore significantly less optimistic than many other investors. The impact on economic growth and unemployment will be enormous in the coming years. Tackling the coronavirus through a system of my-nation-first and state capitalism is narrow-minded and a one-way street. Only a global approach, of both the virus and the economic crisis, will eventually work."

 

Financial markets outlook not favorable

Saxo Bank expects financial markets to remain unsettled in the coming months - and despite the recent recovery - with the announcement of the half-year results of large companies just after the summer.

The strong rise in US stock markets in particular raises questions for the bank, with valuations there at around 65% above those in Europe. Despite the quarrels within the EU, the bank does think it might be wise for investors to look more closely at Europe.

The bank sees opportunities for small caps operating locally in areas such as consumer products, health care and utilities. Well-funded quality companies also remain attractive, while green and sustainable can also be of interest to investors in the near future.

The full Saxo Q3 Outlook, including analyses on the forex and commodities markets, can be consulted via this link.

Author

Ronald Veerman

Ronald Veerman is a financial expert at BinckBank. Before that he worked as a financial journalist in Den Haag, Brussel and Amsterdam and as chief editor of the main financial newspaper De Financiële Telegraaf (DFT).

 

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