In Q4 2024, unsustainable “overweight” sentiments in AI, defense and obesity drugs could lead to a cascade of crumbling sandcastles: report

According to strategists from trading platform Saxo, unsustainable fiscal spending and geopolitical risk could cause “surprisingly resilient economic growth” in the United States and elsewhere to topple like a sandcastle.

Based on their own internal insights, the analysts have issued their warning that “even the weakest ocean wave — particularly those which impact outperforming sectors such as defense, AI and obesity drugs — could cause the economic sandcastle to collapse.”

At the same time, they have predicted a “calm macroeconomic outlook” for the next three months into Q4 2024 and the November US presidential election. However, the firm’s chief investment strategist, Peter Garnry, has described current market conditions as “an echo from 2021”, including “simple extrapolation of recent growth, a belief that technology growth has no limits, speculation in crypto and meme stocks, strong buy-the-dip patterns, extreme index concentration and strong momentum in a narrow group of the market”.

As far as various industries with links to technology are concerned, the report’s evaluations are (refer to table):

  • Healthcare: An Overweight situation catalyzed by “the highest estimated forward growth on obesity and oncology”
  • Information technology: An Overweight situation catalyzed by “the highest momentum, improving profitability and high growth”
  • Communication services: A Neutral situation, catalyzed by a “stable outlook based on good underlying growth”
  • Financials: An Overweight situation, catalyzed by “the highest net interest margin and pickup in loan growth”

According to Statista data, in May 2024, the US publicly held debt was around US$34.55 trillion, and the country’s public debt ceiling has become “one of the most prominent political issues in the States in recent years, with debate over how to handle it causing political turmoil between Democrats and Republicans.”

Saxo’s other self-described “outrageous predictions” also include Robert F Kennedy Jr winning the US presidential election; the end of capitalism in the USA; a generative AI deepfake so deceptive that it causes regulatory crackdowns that puncture the AI hype; and obesity drugs causing people to stop exercising and catalyzing a major world health crisis.