There has been some debate over the possibility of economic conditions deteriorating to the point of another recession.
Large investors and financial institutions have started raising warning flags. JPMorgan pegs the chances of a US recession at 76% over the next three years. Citigroup says it’s more like 65% over the next year.
According to Ram Gandikota, senior portfolio manager and director of research at the fund manager Ativo Capital, which managed over $1 billion as of October, a recession in five years would be “natural.”
The only thing that could throw the global economy into a downturn before that, Gandikota said, is a catastrophic geopolitical event.
“The only things that would do that might be a serious terrorist attack,” Gandikota told Business Insider. “The situation in the Middle East could deteriorate — it might be something like another 9/11.”
Gandikota emphasised that he thought chances were slim, but with recent terrorist attacks in Paris and San Bernardino, California, the threat of ISIS, and the geopolitical entanglements in Syria, there’s a heightened sense of concern.
The possibility of an economic reaction to a serious geopolitical event is not unprecedented. Using Gandikota’s example, there was a serious drop-off in the stock market after the 9/11 attacks, but it made a recovery soon after.
Additionally, Gandikota said the standoff between Russia and Turkey was worrying and could have ramifications on the global economy if the situation between the two countries makes a turn for the worse.
In terms of economic outlook, there isn’t much else that Gandikota sees slowing down the economy. This is despite what has been one of the longest economic cycles ever.
The danger, according to Gandikota, is a serious geopolitical shakeup and with it an unnatural recession.
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