Anyone expecting to see an immediate reference to Albert Edwards or Dylan Grice when the name SocGen is mentioned will be disappointed. Below we present a comprehensive outlook report by the firm's Michala Marcussen and her team, which unlike the abovementioned duo of doom, is far more optimistic (not necessarily an outlook we share), although it does provide several unique approaches to evaluating and quantifying future risk. For one, the firm analyzes 6 "anchor themes" which it believes will shape the near and medium term future, namely a "sustainable recovery", "policy asymmetries", a "US mini-v", a "V-shaped recovery for Japan", "German diet for Euro area" and "China bumpy landing." Then it evaluates the impact of each of these across monetary policy, bond yields, currency and risk assets. As we said we disagree with virtually all of the firm's assumptions, but in analyzing the logical consequences of each faulty premise, one can then merely flip the conclusion. Additionally, SocGen also provides a risk map with a black/white swan distribution curve, which identifies the biggest growth outlook downside and upside risks. Bottom line: not a report of the intellectual caliber one would expect from the firm's two core contrarians, but certainly a glimpse into how the traditional bullish groupthink is trying to explain away the current regression to the depressionary mean, and just what outcomes their delusions will have on various market products.
SocGen's Anchor Themes:
And its risk map: