Saxo Bank CIO Jakobsen Predicts Another “Shock Drop” in Markets; Addicted to Cheap Money

Inquiring minds are tuned into the Saxo Bank’s 4th Trading Debate on Volatility and Performance.

Another “Shock Drop” in Markets

Saxo Bank CIO Steen Jakobsen says Another ‘Shock Drop’ is Coming and it’s Coming Soon

Steen takes the view that central bank policy is creating a ‘fantasy land’ for investors and he points out that the recent ‘day dive’ in markets was a closer reflection of reality.

Steen outlines his suggestions for trading ahead of another dip in mid November with targets for the S&P 500 around 1810 and the Dax at 8000 – 7800.

China Replicates West’s Mistakes Says Trading Panel

Martin O’Rourke, Managing Editor of Saxo’s TradingFloor.Com says China ‘Replicates’ West’s Mistakes

“China’s lesson from the Asia crisis of the 1990s was never to be beholden to the West for debt,” Director at Fathom Consulting Danny Gabay said. “Our concern is China will mismanage what increasingly looks like a hard landing.”

“China has effectively managed to replicate the mistakes of the West since the global financial crisis,” said Gabay. “The Chinese will ultimately be defaulted upon.”

Addicted to Cheap Money

Societe Generale macro strategist Kit Juckes also warned of some tough times ahead. “We’re getting deeper into a mess. We’re addicted to cheap money and the addiction is getting stronger.”

Martin Wolf Bearish on Markets and China

In another Trading Debate panel Martin Wolf Says He’s Bearish on Markets.

Martin Wolf, chief economics commentator at the Financial Times and one of the main speakers at Saxo Bank’s #TradingDebates event in London today. “The world is never out of the woods and people will always get lost in them,” he said.

“The Chinese growth model is collapsing and they know it,” says Wolf. “China will disappoint on the downside and we will see the negative impact of that on commodities,” he added.

As to how this will affect trading and traders the world over, Wolf is equally blunt: “I would expect more turbulence,” he said.

“All the problems that existed before the crisis are still with us, with the addition of the problems created by the crisis,” he warned.

Major Bear Market Coming 

My view is that 1810 on the S&P would be only the beginning of the bear market that is to come. 1500 or even 1200 on the S&P would not shock me.

Once sentiment reverses for good (and it will), I highly doubt that even more cheap money will help the markets. But I offer no timeframe.

In contrast, Steen made a call with a timeframe and a short-term one at that.

Mike “Mish” Shedlock