Two Sigma, the $30 billion hedge fund which use artificial intelligence and advanced technologies to find investment opportunities, asked a bunch of Wall Streets analysts what they’re worried about.
More than 120 researchers responded, estimating the probability of nine different “tail risks.”
“Not surprisingly, respondents (60 per cent) cited a hard landing in China, defined as a GDP growth of less than 3 per cent per year, as a tail risk that warrants concern,” the note said.
Here is the key chart from the note:
It is interesting to note that a hard landing in China is not the most immediate concern. That dubious honour goes to a market liquidity event, where there is a 20% drop in a particular asset class.
“Survey participants believe a market liquidity event poses the most imminent threat, with respondents assigning an almost 50 per cent likelihood to such an occurrence within the next year,” the note said.
Here is the chart on the timing of the risks:
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