‘Outrageous’ predictions inform investor stress tests

A crash in UK housing prices and Mario Draghi leaving the European Central Bank are among 10 “outrageous” predictions for 2015, according to Saxo Bank, which forecast the oil-price slump in a similar list last year.

An increase in interest rates by the Bank of England could drive down UK housing prices by as much as 25%, Saxo Bank said in a note listing unlikely 2015 events that could have significant consequences for global markets should they occur.

Bundesbank president Jens Weidmann could become the next ECB chief to help bring Germany on board with a quantitative-easing programme, as Draghi would leave to be Italy’s head of state, Saxo Bank speculated.

“While the predictions outline rather extreme market scenarios, over the years, a number of them have unfortunately come true,” Steen Jakobsen, chief economist at the Danish lender, wrote in yesterday’s note.

The scenarios give investors a “chance to stress test their assumptions about the future and what these events might mean for their own investments”.

Here are the eight other predictions:

• Britain heads closer to an exit from the European Union as the UK Independence Party wins 25% of the votes in next year’s general election; yields on the nation’s debt surge.
• Japanese inflation reaches 5%.
• China devalues its currency by 20%.
• Russia defaults again.
• Hacking attacks wreak havoc in the e-commerce industry, sending Amazon down 50%.
• Iceland’s Bardarbunga volcano erupts, releasing noxious gases and shifting weather patterns, clouding skies and disrupting harvests across Europe.
• Cocoa futures jump to a record $5,000 a metric tonne.
• High-yield corporate bond spreads double.

Last year’s “outrageous” predictions included Brent dropping to $80 a barrel as oil producers fail to respond to a global glut.

OPEC last month refrained from cutting production, driving Brent Crude down to $65.15 yesterday in New York.