Saxo has today launched its Quarterly Outlook for Q2 2024. As elections in key market countries dominate global discussions, Saxo’s Strategy team highlights the events and indicators that investors and traders should keep an eye on. They also explore whether this focus on elections is diverting attention from the actual figures affecting global markets.


In his macro note, “It’s all about elections and keeping status quo”, Steen Jakobsen, Saxo’s Chief Investment Officer, emphasises that “election optimism and a rally in equities have so far masked the inconvenient truths underlying our economy, where debt continues to grow faster than GDP.”

The current wave of optimism in the stock market, driven by election fever, hides a more uncomfortable truth. Our economy is in a delicate state, with debt accumulation outpacing GDP growth. Central banks around the globe are tightening the purse strings, which, when combined with high real interest rates and the mountain of existing debt, could spell trouble for our economic momentum.

Explore our full Outlook, including Steen Jakobsen’s full macro analysis, here: 2024: The wasted year.


Saxo’s main calls for Q2 2024:


Fixed income: Keep calm, seize the moment!


As the global economic pace moderates and inflation rates begin to decline, central banks might ease their stringent monetary policies, possibly cutting interest rates in the near future. This scenario presents a compelling reason for investors to consider extending the duration of their portfolios, although caution is advised for very long-term investments due to persistent inflation concerns.

Developed markets’ monetary policies are likely to begin diverging, especially between the US Federal Reserve and the ECB, as the Fed is likely to begin slowing down quantitative tightening while the ECB will accelerate tightening in June by starting to disinvest bonds in the PEPP programme. Such divergence will likely increase rate volatility, particularly for longer-dated yields.

The fixed income landscape offers various opportunities adaptable to different macroeconomic conditions. Althea Spinozzi, Saxo’s Head of Fixed Income Strategy, says that “despite fiscal concerns, sovereign bonds continue to demonstrate their value as a portfolio hedge,” underscoring the resilience of these investments amid economic fluctuations. With the bond market presenting attractive valuations and yields near 15-year highs, investors have a valuable chance to navigate through the challenges of the current economic environment.


Equities: The AI and obesity rally is defying gravity


In the whirlwind of market dynamics, the fervour around Artificial Intelligence (AI) and innovative obesity treatments has notably altered investment landscapes. The valuation of companies like Nvidia and Novo Nordisk has skyrocketed, underpinning a speculative boom reminiscent of past market bubbles. This speculative fever, alongside a complex backdrop of economic indicators, suggests a pivotal moment for investors, encouraging a nuanced and more neutral approach towards US equities in anticipation of potential valuation adjustments.


In relation to the wave of global elections, Peter Garnry, Saxo’s Head of Equity Strategy, highlights how they are impacting strategic shifts in investment preferences. He particularly notes that “this year is the biggest election year in modern history, with the US election on 5 November being the most important election, and especially for Europe.” This sentiment reveals the ways in which geopolitical tension and uncertainty can impact on investment strategy, particularly in relation to European defence stocks.


As the election narrative unfolds, it’s evident that evolving market conditions and the geopolitical landscape are crafting a new paradigm for investors, steering them towards sectors and regions poised for resilience and growth.


Commodities: Is the correction over?


The commodities market is showing signs of recovery after the year-long consolidation period that followed a significant growth spurt from 2020 to 2022. This potential turnaround is buoyed by the anticipation of rate cuts from major central banks, which may soften the US dollar and reduce funding costs, thereby fuelling growth. While natural gas has underperformed, falling 25% this year, the overall Bloomberg Commodity Total Return Index would have seen an increase if this sector were excluded, indicating a broader undercurrent of market strength. Notably, the metals sector, particularly gold and silver, has already started to rebound, benefiting from robust demand and the prospect of more favourable financial conditions.


Looking ahead, the outlook for commodities – especially metals – remains positive. “We maintain our 2024 call on gold to reach USD 2,300 per ounce,” says Ole Hansen, Saxo’s Head of Commodity Strategy, with gold potentially climbing as high as USD 2,500. Copper, dubbed the “King of Green Metals,” is also on track for success, driven by steady demand and the threat of supply disruptions. Lower funding costs and economic support measures in places like China could further bolster the market for selected industrial metals, setting the stage for a broader commodities rebound.


FX: The rate cut race shifts into high gear


In the global currency market, nuanced shifts are anticipated as central banks – particularly the US Federal Reserve – adjust their policies in Q2. According to Charu Chanana, Saxo’s Head of FX Strategy, “markets now expect the Fed to start cutting rates in June or July … This suggests that the competitive pivot story will keep driving the FX markets in Q2.” This environment potentially offers opportunities for FX traders, especially in high-beta activity currencies and emerging market currencies, which may benefit from a weaker US dollar.


Furthermore, stretched long positioning in GBP and clear signs of UK disinflation in Q2 could threaten the resilience of sterling and “bring scope for EUR/GBP to drift higher”. The Japanese yen is also spotlighted for its potential gains due to the risk of carry bets unwinding after a pivotal shift by the Bank of Japan away from negative rates.


Looking ahead: Strategic diversification and risk management


As Q2 2024 unfolds, it’s important to have a balanced and strategically diversified approach to investment. With a year full of major elections, it isn’t just “about playing the markets, but rather recognising the narrative driving investor sentiment,” Jakobsen concludes. With an increased focus on fixed income and commodities and adjustments to equity exposure across geographies, Saxo’s strategy aims to weather potential volatility while seizing growth opportunities.


To read the full Q2 2024 Outlook, please visit:


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