Markets too complacent
Since late last year risky assets have seen a sharp rally, influenced by improving economic data and not least the ECB’s massive injection of liquidity through its 3-year LTRO in December. Global risk perception has softened across assets, taking our proprietary risk aversion indicator, the Nordea Risk Perception Index, to a lower level than just prior to the Lehman bankruptcy in September 2008.
However, considering the macro risks hanging over the global economy, U.S. Chief Analyst Johnny Bo Jakobsen and Euro area Chief Analyst Anders Matzen argue that markets may be too complacent.
They see at least four downside risks that could materialise this year, undermining global growth and eventually negatively affecting investor confidence and market valuations of risky assets.
- The US: the mother of all fiscal tightening.
- The Euro-area economy and politics could turn much less benign over the coming months.
- Risk of a hard landing in China.
- Risk of a new oil price shock.
Anders Matzen & Johnny Bo Jakobsen
Global Macro & Strategy