[ad_1]
US equity investors had concerns in August, with a resurgence in US-China trade and a brief reversal of a key yield spread that enabled equities to reach their worst performance in the first half of 2019.
The Dow Jones Industrial Average
DJIA, + 1.20%
is down 3.7% over a month so far, the S & P 500
SPX, + 1.44%
fell 3.1% and the Nasdaq Composite Index
COMP + 1.67%
lost 3.4%.
But even if very likely risks – such as the US-China trade conflict – captivate the minds of investors, there is a growing combination of less likely risks, called gray swan events, that could, individually or in combination, create even more heartburn. for investors at the end of the third quarter.
1. Brexit without compromise: The October 31 deadline for Britain to reach an agreement ordering the EU's exit in an orderly manner is fast approaching, and newly elected Prime Minister Boris he was ready to face the consequences of a Brexit without agreement, "that can, does or die." A conservative lawmaker even suggested that Johnson could unilaterally exit Britain from the EU's 39, here August 24.
The UK's Bureau of Fiscal Responsibility estimated in July that a Brexit without agreement would put the world's sixth largest economy in recession. The European economy, already shaken by the global downturn in the manufacturing industry, would also be affected by the new trade barriers and uncertainties that would result from Britain leaving the EU.
2. Automobile prices: An even greater threat to the European and global economies could be a significant increase in trade tensions between the United States and the EU. On May 17, the Trump administration announced its determination that US imports of automobiles and auto parts pose a risk to national security, paving the way for tariffs of up to $ 128 billion. tariffs on motor vehicles from the EU and Japan, which would be the main targets for new levies
See also: Trump delays car rates for EU and Japan for six months
3. EU-United States. trade dispute: In addition to auto tariffs, the threat of expanded relations between Europe and the United States. commercial conflict is emerging. Europe was hit by 25% tariffs on steel and 10% on aluminum imposed in 2018, against which the EU fought back with a customs duty on the EU. 25% steel.
The most recent development is the Trump administration's proposal to impose tariffs on the European aerospace manufacturer Airbus SE.
EADSY, + 0.50%
, Europe must retaliate in kind against Boeing Co.
BA, + 0.75%
. Even if it were circumscribed until now, the intensification of trade tensions with the EU could be much more complex than China, given the degree of economic integration.
4. Events in Hong KongPolitical unrest has raged in Hong Kong for more than two months, while a protest against an extradition agreement with mainland China has metastasized into a wider movement in favor of democracy.
The conflict helped trigger a 14% decline in the Hang Seng benchmark
HSI, + 0.94%
Since May, investors are worried about Hong Kong's destiny as a global financial center and are wondering whether a possible crackdown in Beijing could trigger a new conflict with the West.
5. Italian fiscal drama: While Italy has avoided Brussels sanctions for its inability to reduce its budget deficit to acceptable levels in 2019, the third largest European economy is facing a conflict with the European Commission in 2020, when that its budget deficit should reach 3.5% of GDP, well above the 3% limit set by the EU regulation.
6. Iranian conflictA series of near-military clashes between the United States and Iran has been largely overshadowed by the oil and stock markets this year, including statements by Iranian and US armed forces that each would have shot down a opposing drone operating near the Strait of Hormuz. thousand points of passage for the world oil reserves that border Iran and separate the Persian Gulf from the Arabian Sea.
These incidents were followed by interchangeable seizures of British and Iranian tankers and by the Iranian threat of a complete closure of the strait, which would cut off the flow of one-third of world oil shipments and endanger a wider military conflict. likely to have an impact on the conflict. economy and global markets.
7. Money Wars: The historically strong dollar, supported by relatively strong growth in the US economy and extraordinary monetary stimulus from the European Central Bank and the Bank of Japan, has been an adverse impediment to US equities this year.
Central banks say monetary stimulus is aimed at lowering interest rates in their home economies and not devaluing currencies to boost exports, but President Trump has put this reality in the forefront of his attacks. accusing trade rivals perceived to use monetary stimulus measures to lower the values of their currencies.
The administration recently described China as a currency manipulator, while putting pressure on the Federal Reserve to reduce its rates, partly to devalue the dollar. An escalation into currency wars could further undermine investor and corporate confidence, which is already a major hurdle for global markets.
8. India-Pakistan conflict: The Kashmir region is a point of conflict (sometimes military) between the two nuclear powers since the partition of British India into independent states in 1947.
Tensions are rising again after the government of Indian Prime Minister Narenda Modi revoked in early August the special status of the Indian state of Jammu and Kashmir, which gave him autonomy and he allowed to institute laws allowing him to remain the only Indian Muslim. Majority status.
The Indian government then sought to suppress the demonstrations by sending thousands of soldiers to the area; cut Internet, mobile phone and landline connections; and stop Kashmiri politicians. Pakistan has degraded diplomatic relations with India and halted bilateral trade. The Pakistani prime minister said he was considering acts of violence.
9. Argentina: The Argentine stock market
SPMERVAL, -2.04%
He lost more than 37 percent on Monday after pro-president Mauricio Macri lost 48 percent to 32 percent of his primary election to center-left opponent Alberto Fernandez, raising fears that Macri does not lose elections Argentina will return to its free consumption habits that have led to numerous failures and inflation crises over the last few decades.
Barron's on MarketWatch: Argentina faces a leadership crisis and is a problem for its markets
10. All other trades: Other major economies have followed the example of Trump using trade barriers as tools to impose policy changes abroad. South Korea and Japan are mired in a trade battle rooted in decades-long conflict over the reparation of Japan's atrocities during its colonization of South Korea in the first half of the 20th century.
The United States and India, the world's fifth-largest economy, are also coming closer to a trade war, after India fought back in June against US tariffs on steel and aluminum, raising tariffs. US $ 1.4 billion. Trump responded with attacks against the Indian government, write in a tweet that "India has long had a field day putting tariffs on US products. This is no longer acceptable!
[ad_2]
Source link