In his latest Global Economic Update, available on the Podzept podcast, Torsten Slok, Chief Economist, Deutsche Bank Securities, discusses the five key risks he is watching as the US economic expansion sets an all-time record this month.
The key risks are:
- A sudden blow-up in credit markets. Global quantitative easing has loosened financial conditions driving investors in to financial assets. A re-pricing in high yield or investment grade debt could have negative consequences for the economy.
- The risk that the US consumer becomes tired of spending. Interest rates on some consumer loans have risen, along with delinquency rates for some consumer credit products.
- Damaged Fed credibility? After saying US treasury rates are far from neutral in October 2018, the Fed backed down and went on hold a few months later. Investors could begin to question the Fed’s independence and credibility.
- Is a US / Europe trade war next? With attention turning away from China, is the EU next on the United States trade agenda?
- If China start to run a current account deficit that could put pressure on the Chinese government to support the RMB by selling US treasuries.
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