JP Morgan's top equity analyst reveals his biggest fear for 2017

Business Insider asked the Head of US Equities at JP Morgan what keeps him up at night.

His answer was loud and clear: An ongoing trend of US dollar strength.

“The dollar continues to strengthen,” said Dubravko Lakos-Bujas in an interview with Business Insider. The dollar on a global trade weighted basis has increased by about 20-25% over the course of the last 2-3 years, he pointed out. And according to Lakos-Bujas, further strengthening in the dollar could come on the back of President Trump’s corporate tax reform proposals like a border tax adjustment.

“If that trend persists, you could see the global economy getting further pressurised. Keep in mind that 60% give or take of the global economy directly or indirectly is linked to the dollar. The dollar plays a very important role.”

After the dollar, Lakos-Bujas is worried about higher interest rates and trade.

“There’s a good amount of leverage in the system, especially if you look at corporates,” he said. According to Lakos-Bujas, leverage in US corporates ex-financials is in line with all time highs back to the 2007 levels. “There’s less room for tolerating a significant amount of rate increases,” as higher rates will make that corporate debt more expensive to pay back.

On the trade side, Lakos-Bujas looks toward the uncertainty around the US adopting significant changes on border taxes and other restrictive trade measures that could end up resulting in “significant” retaliatory effects from big trading partners like China.

So what can investors do to get a good night’s sleep?

“If you believe that a strong dollar and rising rates are going to continue tightening conditions, don’t be surprised if at some point the Fed turns marginally more dovish,” said Lakos-Bujas. “This means that gold and gold miners might be an interesting hedge to an existing portfolio.”

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