An EU wealth tax and the end of U.S. capitalism: One bank’s ‘outrageous’ predictions for 2024


The Wall Street bronze Bull appears out to an empty Broadway in Lower Manhattan, New York, on Aug. 28, 2011, as Hurricane Irene hits the metropolis and tri-state space with rain and excessive winds.

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An EU wealth tax, the “end of capitalism” in the U.S. and a significant well being disaster arising from weight problems medicine are just a few of the “outrageous predictions” put ahead by Saxo Bank in a report revealed Tuesday.

Heading into 2024, the Danish funding financial institution urged the world is at an “inflection level, with the acquainted street of the final decade coming to an end.”

The predictions give attention to a “collection of unlikely however underappreciated” occasions that in the event that they had been to happen, would “ship shockwaves throughout the monetary markets.” The forecasts are usually not consultant of the financial institution’s official views.

“It’s all about scary thought processes, and what I’ve discovered over the final 21 years is that boards prefer it once they’re doing ahead planning, central banks prefer it for the threat mitigation and I believe our shoppers adore it as a result of it is partaking — it is like being at an excellent dinner desk dialog the place persons are pushing towards one another,” Saxo Bank Chief Investment Officer Steen Jakobsen informed CNBC on Tuesday.

EU goes ‘Robin Hood’

As the European Union requires extra funding for a collection of long-term coverage objectives, together with local weather change mitigation, well being care, schooling and the warfare in Ukraine, Saxo Bank Head of Equity Strategy Peter Garnry urged the bloc’s leaders may implement a 2% wealth tax.

This could be rendered extra doubtless if the inhabitants “realises how little in tax billionaires are literally enjoying,” he speculated, with social unrest steadily simmering throughout the continent.

Citing the Global Tax Evasion Report 2024, Garnry famous that regardless of its huge welfare system in comparison with the U.S., the EU has 499 billionaires (in U.S. greenback phrases) who pay the lowest private tax in share of wealth in comparison with billionaires from North America and East Asia.

“Billionaires in France have a pre-tax revenue price on par with US billionaires regardless of the undeniable fact that the whole inhabitants is paying between 46-50% in common tax, violating the core precept of reciprocity. In the Netherlands, it’s even higher to be a billionaire, as the common tax price is under what US billionaires pay, Garnry famous.

A 2% wealth tax on EU billionaires would increase 42 billion euros ($45.5 billion) towards the funding of key coverage goals, whereas a wider 2% tax on multi-millionaires may elevate this to 100-150 billion euros, Garnry projected.

“The EU’s trendy model of Robin Hood sends shockwaves by means of the European luxurious business. Recent research have proven a powerful correlation between the pursuit of luxurious gadgets and ranges of revenue and wealth inequality,” Garnry predicted.

“The EU Commission’s new wealth tax instantly lowers market expectations for luxurious items demand in the future and traders dump European luxurious shares.”

This would see shares of French luxurious large LVMH, Europe’s second-largest firm by market capitalization, plunge 40%, whereas luxurious car makers resembling Porsche and Ferrari would additionally endure, the report speculated.

Obesity medicine set off a well being disaster

The success of new GLP-1 weight problems medicine have been a key fixture in 2023, with the wildly widespread Wegovy propeling Denmark’s Novo Nordisk to supplant LVMH as Europe’s most respected publicly listed firm.

But Saxo strategists mentioned this creates a threat that reliance on such medicine grows to the extent that populations lower train and enhance junk meals consumption.

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Should this coincide with governments and U.S. well being insurers more and more viewing anti-obesity medicine as potential price savers, demand may skyrocket and vastly outstrip provide, leaving those that have begun a course of remedy with out entry and due to this fact uncovered to this variation in way of life habits.

“Global grownup weight problems charges shoot up from the present 39% to 45% in 2024, bringing a number of different unwanted effects, resembling an increase in diabetes incidence or perhaps a spike in coronary heart illness, extra accidents on account of lowered muscle energy and normal discount in immune system effectivity. Increased sicknesses and sick days make world productiveness dip,” Garnry and fellow strategist Charu Chanana projected in the report.

The end of U.S. capitalism

Against an more and more unsure geopolitical backdrop, Saxo Senior Fixed Income Strategist Althea Spinozzi hypothesized that the U.S. authorities may very well be pressured to additional enhance protection spending whereas the Federal Reserve should should tighten financial coverage amid a second wave of inflation.

In order to keep away from social unrest, Congress could also be pressured to extend fiscal spending, sending the funds deficit above 10% of GDP and that means the authorities should foster demand for U.S. Treasurys urgently.

“The consideration goes to the inventory market, the place the ‘Magnificent Seven’ have now grow to be twelve, because of a missed downturn and authorities help applications directed to lenders and owners,” Spinozzi mentioned. The group presently includes Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla.

“To be a part of the membership are Eli Lilly, Novo Nordisk, JPMorgan Chase, LVMH and ASML. As the ‘Twelve Titans’ multiplies their valuations inside a number of months, inequality will increase between traders and non-investors.”

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Understanding that political stability relies upon upon its continued potential to finance an enormous deficit by means of U.S. Treasury issuance, thus decreasing rates of interest, the authorities should enhance the attractiveness of home bonds over shares.

“Under intense stress from the White House, Congress makes capital positive aspects and curiosity revenue on US Treasuries tax-free. With authorities debt in the palms of home traders, the price of funding turns into much less unstable,” Spinozzi speculated.

“This dramatic transfer marks the end of capitalism, as cash rotates from non-public companies to the public, and holding riskier belongings turns into costlier. Counterintuitively, the ‘Twelve Titans’ consolidate their market dominance, as they profit from long-term decrease price of funding, whereas the relaxation of the inventory market collapses.”

Other outrageous predictions embrace: oil hitting $150 per barrel and Saudi Arabia subsequently shopping for European soccer’s Champions League with the intention to take it world; a generative AI deepfake triggering a nationwide safety disaster; Robert F. Kennedy Jr. profitable the U.S. presidential election; Japan being pressured to desert its yield curve management coverage; and a coalition of deficit international locations forming a “Rome Club” to restructure world commerce dynamics.

The financial institution has made a set of “outrageous predictions” annually for the final decade and some have truly come true — or not less than come shut.

In 2015, Saxo forecasted that the U.Okay. would vote to leave the European Union following a United Kingdom Independence Party landslide, it predicted Germany would enter a recession in 2019 – which the nation narrowly avoided – and it wagered that bitcoin would experience a meteoric rally in 2017.



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