Bank Of America's David Woo shares his worries about the financial markets

The bear trader, David Woo, says he would not touch the emerging markets, even if they were his last choice.

The Bank of America strategist is extremely worried about the market volatility we see on world markets - especially in developing countries. Last he was so worried in 2008. He says that after the capture of the Democratic House, it will be harder for Donald Trump to make a fruitful deal with China, and this will cause further controversy over the issue of the government debt ceiling.

"We will have a $ 1 trillion budget deficit, a debt-to-debt struggle, and at the same time the American economy will show signs of slowdown." - says Woo. It is these factors that cause concern.

In the EM markets, shares have entered the sword territory this year after US-China trade strains have escalated and so investors have escaped risky assets. The Deputy Foreign Minister has called on the US Ambassador to protest the arrest of Huawei's CFO. This event only forms an extra crack in the relationship between the two super powers.

On the issue of trade warfare, Woo said the markets are yet to understand that this problem will soon not go away and again stressed the avoidance of EM markets because of tensions between Washington and Beijing. According to him, however, the two sides move closer to consensus because there is no doubt that the White House wants an agreement, and China is increasingly setting its foreign policy to resolve the dispute.

David Woo is a fan of Jay Powell and respects him, as well as supporting the Fed's policy. He says that Powell had impressed him with his speech a few months ago. If we want to know what their next move is, do not listen to what he has to tell us, just look at the economic data. Powell said in his statement: "Fed knows so much about the economic outlook as you, me and everybody else on Wall Street." According to Woo, Powell will become a risk manager such as Greenspan.

For the dangers that are lurking next year, David Woo gave an example in 2011. Then adventure almost failed to lead the US to bankruptcy, which however led to a loss of AAA rating. This year we are seeing more volatility than ever before. 2019 may turn out to be a little worse.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

Read more:

• Risk off after the escalation in the Middle East, markets are recovering in a period of calm
• The macroeconomic events for today’s trading calendar
• The US government has confirmed the attacks, Trump is calling an emergency staff meeting
• Has the war between Iran and the US started?
• US markets remain under pressure, traders await Iran’s response