Deutsche Bank - Biggest risks for 2019

Stock markets’ nearly 20% tumble since October can at least partially be blamed on the rise of algorithmic trading and passive risk-parity investment funds, Deustche Bank Securites Chief International Economist Torsten Sløk told MarketWatch.

In a research note published Friday, Sløk named “30 risks to markets in 2019,” with “algo-driven, risk parity-driven fire sale in equities topping the list.

1.Algo-driven, risk parity-driven fire sale in equities and credit continues
2.Slowing growth in China and Europe slowing down the US economy
3.Slowing growth in China and Europe triggering significant US dollar appreciation
4.Tailing US Treasury auctions and/or declining bid-to-cover ratios
5.Increased US T-bill issuance continues to push 3-month Libor-OIS wider
6.Increased US Treasury issuance pulls dollars out of IG credit and equities
7.Higher hedging costs continue to lower European and Japanese appetite for US credit
8.ECB QE ending means less global demand for fixed income
9.BoJ QE slowing means less global demand for fixed income
10.US 2s-10s yield curve inversion has negative impact on confidence in credit and equity markets
11.US corporate tax cuts continue to boost buybacks but not capex
12.Impact of potential US government shutdown on markets
13.No deal Brexit in March could be negative for markets
14.No deal Brexit in March could be negative for UK economy and hence also European economy
15.US-China trade war escalates further
16.US-Europe trade war escalates further
17.Fed decides to ignore accelerating wage growth. This could threaten profit margins
18.Fed decides to ignore accelerating wage growth. This could unanchor inflation expectations
19.Escalation of yellow vest protests in France
20.European Parliament elections
21.Continued inflation of housing bubble in Germany
22.Italian fiscal situation
23.House price crash in Australia and Canada
24.Chinese economy less and less responsive to stimulus
25.China: Current account deficit arrives faster than consensus expects
26.Japanese growth can get hit by China slowdown
27.EM: Potential political changes in India, Argentina, South Africa, and Indonesia
28.Continued increase in global inequality
29.Fed and ECB re-start QE and risky assets don't rally
30.Monetary and fiscal policy are out of ammunition and the world experiences a Minsky moment

Source: Deutsche Bank Research

picture: pixabay.com

Read more:

• And for all the bounty hunters: Iran offers $80m for the head of Donald Trump
• US service member and 2 US Defense Dept contractors killed in Kenya attack
• Iranian Quds leader Qasem Soleimani has been killed – how are markets reacting
• A calm end of an otherwise loud 2019
• Old but Gold – Top 5 posts of Varchev Finance