Deutsche Bank’s chief economist, Torsten Slok, sent out a list to clients on Friday of 20 risks to the economy and markets next year. CNBC was granted permission to publish the full list.
20 risks to markets in 2020
- Continued increase in wealth inequality, income inequality and healthcare inequality.
- Phase one trade deal remains unsigned, continued uncertainty about what comes after phase one.
- Trade war uncertainty continued to weigh on corporate capex decisions.
- Ongoing slow growth in China, Europe and Japan Triggering significant US dollar appreciation.
- Impeachment uncertainty & possible government shutdown.
- US election uncertainty; implications for taxes, regulation and capex spending.
- Antitrust, privacy and tech regulation.
- Foreigners lose appetite for US credit and US Treasuries following Presidential election.
- MMT-style fiscal expansion boosts growth significantly in US and/or Europe.
- US government debt levels begin to matter for long rates.
- Mismatch between demand and supply in T-bills , another repo rate spike.
- Fed reluctant to cut rates in election year.
- Credit conditions tighten with more differentiation between CCC and BBB corporate credit.
- Credit conditions tighten with more differentiation between CCC and BBB consumer credit.
- Fallen angels: More companies falling into BBB. And out of BBB into HY.
- More negative-yielding debt sends global investors on renewed hunt for yield in US credit.
- Declining corporate profits means fewer dollars available for buybacks.
- Shrinking global auto industry a risk for global markets & economy.
- House price crash in Australia, Canada and Sweden.
- Brexit uncertainty persists.
Source: Deutsche Bank
Top on the list of concerns is the “continued increase in wealth inequality,” which is an issue front and center in the current presidential election cycle. Democratic presidential candidates Elizabeth Warren and Bernie Sanders have called for additional taxes on the richest Americans to narrow the wealth gap.
I hope you found this information helpful. Have a successful week!