Soc Gen’s Cross Asset Research Team is out with the excellent quarterly Global Economic Outlook which features their famous black swan chart of major market risks.
Now of course by their nature black swans are not predictable but what is important in the Soc Gen analysis is the risks that they see as being potentially destabilising, in both directions, to the current market paradigm.
So in many ways it’s not what’s on the list, it’s the changes to the list or importance of the list, which highlights the key risks to the markets working assumptions.
To that end Soc Gen is worried about Europe and specifically that the ECB itself can not dig its way out of the mire and that Europe, along with Japan, are “seeking to export deflationary pressure through an expansionary monetary policy also targeting currency weakness.”
They are also worried about the ongoing court case on the OMT and important elections across the Eurozone in 2015 which will “slow the reform agenda” and leave the ECB on its own.
It means that just like 2010 Europe could be front and centre once again in 2015.
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