• Investment bank Saxo has released its 10 predictions for 2021, calling the improbable events that could shift entire economies.
• They reflect where the world could be headed after a particularly tumultuous 12 months that has affected everything from emerging technologies to debt.
• “Our not-so-outrageous prediction is that 2021 will bring the beginning of a reality check to the idea that ‘extend and pretend’ can stretch to infinity and beyond, even as markets have been pricing in that very expectation,” chief investment officer Steen Jakobsen said.
• Visit Business Insider Australia’s homepage for more stories.

From the decimation of cities to complete collapse, Saxo Bank’s far out predictions for 2021 read like a Cormac McCarthy novel.

Fortunately, the investment bank acknowledges that while its annual predictions could eventuate, their improbability is designed more to make investors consider the possibilities of a new year.

“We’ve seen the fastest bear market and recovery in history, as well as central bank balance sheets and fiscal deficits exploding at an unprecedented pace,” chief investment officer Steen Jakobsen said.

“So our not-so-outrageous prediction is that 2021 will bring the beginning of a reality check to the idea that ‘extend and pretend’ can stretch to infinity and beyond, even as markets have been pricing in that very expectation.”

After all, while Saxo’s 10 tongue-in-cheek predictions may not come to pass, they do reflect long-running trends and challenges.

“A structural shift in the labour market is at the top of the list but at the same time, the total economic pie will be even larger – even per capita,” Jakobsen said.

While 2020 was the year when the richer grew even richer at an astounding pace, 2021 may be the year when a universal basic income (UBI) is an idea whose time has come.

Likewise, the world will need to find new solutions to old problems as world world battles climate change and at the time needs as yet greater energy demands. Fake news, future pandemics, monopolies, and rising debt all similarly feature in this ambitious portrayal of 2021.

1. Amazon buys Cyprus and transform it into a tax haven

One of the biggest moves in 2021 unsurprisingly could come from one of 2020’s biggest winners. As monopolies do battle with governments, Saxo sees corporate behemoths taking unprecedented measures to entrench their power.

For Amazon, that could mean “buying up” Cyprus, as the American titan domiciles its headquarters in the island nation and gets its consultants to rewrite the nation’s tax laws.

While Cyprus with its sky-high debts, might welcome the choice, the European Union (EU) would quickly strike back by harmonising tax rules across member states, while the rest of the world finally unites to fight tax minimisation.

If it were to happen, Saxo says you’d want to short tech monopolies like Amazon, Facebook and Microsoft.

2. Germany bails out France

Speaking of debts, Frances might be concerned now that its national debt is projected to rise to 120% of GDP by next year as its economy rapidly shrinks.

While enjoying one of the largest economies in the EU, Saxo thinks it’s possible that it all goes south in 2021, with a series of bankruptcies compelling investors to sell off the nation’s megabucks.

“Given the poor state of public finances and the already extraordinarily high level of debt, France has no other choice but to come begging cap in hand to Germany, in order to allow the ECB to print enough euros to enable a massive bailout of its banking system, to prevent a systemic collapse,” Saxo predicts.

If it happened, you’d want to buy the banks themselves after the bailout.

3. Blockchain kills fake news

As public trust erodes in the news media and fake news proliferates, the world may find an unlikely saviour in the blockchain, the underlying technology of cryptocurrency.

While such a system seems impossible, Saxo wonders whether the technology could verify content and sources, doing away with misinformation for good.

If it transpired, social media companies could be the biggest winners having invested heavily in the emerging concept out of a sense of self-preservation.

4. China’s new digital currency transforms finance forever

With a digital currency linked to the Yuan, China could go completely cashless and open up the country fully to foreign investment.

Not only would it become an alternative to the US dollar, it would enable negative interest rates, boost the Chinese economy, and deepen capital markets.

The shift would call for shorting the US dollar and shifting investment to Chinese bonds and equities.

5. Universal basic income destroys big cities

With the pandemic and automation expected to only exacerbate inequality, a universal basic income (UBI) paying every adult a living wage is launched.

Unshackled from cities made redundant during the pandemic, populations begin migrating back to the regions.

“The new UBI also drives changes in the attitude toward work and life balance, allowing many young people to stay in the communities where they grew up. Meanwhile, the professionals and the marginal workers in big cities also begin to leave, as job opportunities dry up and the quality of life in small, over-priced apartments in higher crime neighbourhoods loses its appeal.”

The best bet would be to short corporate property in cities, via REITs.

6. A coronavirus vaccine kills companies outright

Having thrown everything at the pandemic, central banks and governments may have inadvertently overheated the economy as a vaccine emerges and economies reopen.

In an attempt to return to normal, central banks tighten monetary policy and jack up interest rates too quickly, setting off a tsunami of defaults.

If it came to it, shorting high yield corporate ETFs could make you a quick buck.

Then again, if the collapse was large enough there might not be a safe place left for your cash.

Read Saxo Bank’s top 10 predictions in full here.

Disclaimer: This article contains general information only and is not intended to be used as personal advice.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.