Name: Steen Jakobsen
Position: Portfolio manager at Saxo Bank
Years trading: 25
What asset class and geography are you focused on?
I am a traditional macro investor, but I was brought up in foreign exchange and futures as a proprietary trader.
What is the outlook for the month ahead?
Large volatility swings. The US equity market is starting to look expensive even by the new standards of zero or negative interest rates. With price-to-earnings ratios of about 27 in the United States versus 17 in Europe and 14 in emerging markets, we could see big tectonic shifts from US investment first to Europe and then into emerging markets. The flow is increasingly heading to Europe as the European Central Bank embarks on a quantitative easing exercise relative to the US, where the Federal Reserve is likely to raise rates this year. Overall, the US market will rise between 5 to 6 per cent and Europe 10 to 12 per cent for the full year.
What are the downsides to the outlook?
Volatility and lack of trading liquidity. I am concerned about the lack of market making and trading risk, which in my opinion have made the Swiss franc and crude move much bigger than in a normal business cycle.
What is the best investment at the moment?
Gold and US 10-year fixed income. US growth will disappoint to the downside and gold is the only currency that does not have a central bank trying to devalue it. The bigger issue for investment is the fact we are moving into negative yield. With 30 per cent of Europe government debt yielding a negative return, we have to be cautious on our expectations. If negative yield prevails we must accept that cash under the mattress can suddenly compete with fixed income. The higher risk, but also potentially higher return, lies with investment in emerging markets. They trade at relatively low price to earnings ratio of 14, but for emerging markets to perform we need to see a weaker US dollar. I find it very likely that the dollar will peak in the first quarter, leading the way for a sequential change over from global growth being led by the US to the emerging markets. No one expects emerging markets to do well, hence I see the positive surprise most likely coming from there.
What was the best investment you were ever involved in?
It may sound odd, but Saxo Bank. I bought into Saxo Bank in 2000 at a time when the equity capital of Saxo was smaller than my last bonus from UBS, which I had just joined from. It worked out well, as Saxo grew 25 per cent a year for almost 15 years.
What was the worst?
I bought into an IT company in Switzerland that did algorithmic selection of music. I bought the concept but lost all my money, as the company was late to the market compared to the competition.
Follow The National’s Business section on Twitter