6 Downside Market Risks

Since I already provided 5 reasons to remain cyclically bullish I figured I’d offer the other side of the coin as well.  Here’s 6 downside risks via Deutsche Bank:

1.  US – failure to raise debt ceiling: political deadlock, government shutdown, weak confidence hurts growth.

2.  Europe – political breakdown raises tensions: e.g., antireform government in Italy, political unrest in Greece, antieuro sentiment in core countries amid recession.

3.  Global growth weakens on spill over from a shock in one economic region: e.g., EM lags amid failure to reform, Europe fails to return to growth, slowdown in the US.

4.  Disorderly sell-off in core rates: concern over excess money printing leads to a bond and risk asset sell-off .

5.  China – non-performing loans: rising NPL’s on bank balance sheets constrain credit availability and growth.

6.  Middle East tensions escalate and push up oil prices.


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • brazzo

    eventually there will be a QE that will have zero impact ou asset prices??

  • nick

    If someone cld add to this it’d be helpful. In 1996/7 Martin Taylor who ran Barings very successful EM fund noticed that a reported current account surplus and capital account surplus in Russia according to data was not equating to a rise in net reserves, the true measure of balance of payments account.
    It should have equalled a net increase in reserves by the sum of the two surpluses. (current and capital). Net reserves were going down. Money was exiting the country in size, basically via theft of company assets, through false invoicing and the money would end up in Swiss accounts.

    I am trying to get my head round the Chinese data, but I know a huge amount of money has been syphoned out of the country, massive, bigger than all the next 30 countries put together. Chinese reserve growth is at 0%, whilst from what i can see it should be higher based on the reported current account surplus and capital account surplus.
    I may not be looking at the correct data points but if anyone had them to hand and has a little bit of more of an idea what the accurate numbers are, then i would appreciate it if you could dispell my suspicion that there could be problem for them that is being highlighted in the Net Reserves. Ta