What would be the major risks for the market in the new year? Will there be surprises that can bring the market down again to the levels of Mar 09 that is brewing? I would like to know. Unfortunately as someone said "Surprises won't be surprises if you and me know".
Still i am happy to make some wild guesses so i can observe it along the way -
1) Making to the top of the list is Sovereign Risks - watch out some European countries like Greece. Bad budget, high unemployment coupled with slow recovery can do damage to their debt rating. Downgrades of country ratings will drive away risk capital. There are more than one country on the watch list - Greece, Ireland, Spain, UK... Ukraine and East European countries are vulnerable. (should count Dubai in as well).
2) Fed stops printing money. The $1.25 tril asset-purchase program is due in march and non-extension of it will be signal to withdrawing liquidity. And depending on market interpretation (too soon) it may rattle the market. (may not be likely given the unemployment numbers)
3) Emerging markets face run-off inflation. As a consequence of keep printing money (as opposed to 2), high commodity price and other input price starts to feed into prices hikes of everything... It's likely to happen and no doubt there is concern over inflated asset prices. Some adjustments is due to come when central banks in Asia start to withdraw liquidity.
4) Run-off commodity prices... Are we going to see oil prices go above $100 again? maybe.
5) Commercial Real Estates write-down. Some estimates it's in the range of trillions (amount lost on Residential Mortgage comes to around $2 tril i think).
6) US unemployment numbers up again or stayed high for too long.
7) China export numbers down again
8) Major terrorist attacks, war in Iran, North Korea issue
Wednesday, January 13, 2010
Subscribe to:
Post Comments (Atom)
How about a deteriorating US-China relationship leading to some kind of lose-lose siutation? what could possibly happen?
ReplyDeleteExactly. Trade tensions have come a long way ever since China was accumulating record surplus. Now it has deteriorated to worst in decade. Center of the issue is unemployment and budget deficit. US politians need voters, lots of whom are unemployed... so unless we see unemployment shrinks there is going to be more tarriffs. It also got to find some way to fill the very deep budget deficit hole. One way is to sell more and buy less. On the surface we'll see increasing pressure to appreciate RMB, more tarriffs (essentially making cost of Chinese goods to the level they think "reasonable" without artificially low exchange rate and government subsidiaries). EU is doing the same thing... So this is already happening and is sure to get worse this year. Any strong recovery of export to these developed nations would be positive surprise.
ReplyDeleteThat's why China-ASEAN free trade agreement was pushed ahead. China is betting on emerging/frontier markets like SEA, Africa, Latam...