The Top 15 Risks To The Stock Market Right Now

The S&P 500 Index has broken above all-time-highs.

Many investors see blue skies. Since late-to-the-party bulls are typically the easiest to shake out, any of the following risk factors rising up to challenge the stock market can translate a fake breakout into a fast failure.

Below are 15 risks that I believe investors should be on the lookout for:

Trade War

Fallout from Trump’s trade wars has been felt around the world. In 2018, more than 40% of Germany’s GDP was derived from exports, the most of any major global economy. Now Germany is seeing manufacturing declines. Japan, Russia, and Italy are similarly declining. 

Fitch Chief Economist Brian Coulton reflected that “there can be few precedents since the 1930s of global growth prospects being affected so significantly by trade policy disruptions.” At the IMF and World Bank fall meetings in Washington last week, some members openly noted the pivot in longstanding policy away from open trade maintained since the 1940s, now moving toward protectionism.

Risk 1: Many companies are scaling back their investment plans, something that will have repercussions for years to come. The most important problem remains those factors that we cannot measure – specifically the reluctance to invest. 

Risk 2: This trade war is driving de-globalization, nationalism, and competition. China has created a US $29 Billion semiconductor fund to disentangle themselves from global supply chains and press toward a more isolationist economic model. 

Risk 3: China is also investing in blockchain technology, the innovation behind Bitcoin, which some see as another isolationist move to get away from China’s dependency on the US Dollar. Curious timing how  President Xi advocated for cryptocurrency right after Mark Zuckerberg’s testimony to US Congress. 

Risk 4: 57 fund managers responsible for $800 Billion in AUM across the US, the UK, Europe, and Asia believe that it’s too late for a global economic rescue, according to a Bank of America survey. Heisenberg.  Assuming the major global players do not simultaneously push their economies forward with an investment, the IMF similarly sees the global economy headed downward. The only question for many is whether the downturn morphs into a recession, one where we shouldn’t count on China helping us out of it. 

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