The most destabilizing risks to the stock market ๐
Bad news is worse when you don't expect it ๐ฐ
From TKerโs 10 truths about the stock market:
8. The most destabilizing risks are the ones people arenโt talking about
Surveys of market participants will yield lists of top risks, and ironically the most commonly cited risks are the ones that are already priced into the markets.
Itโs the risks no one is talking about or few are concerned about thatโll rock markets when they come to surface.
Before Russia said it would invade Ukraine, financial market participants werenโt particularly concerned with geopolitics.
According to a monthly survey conducted by Bank of America (BofA) in early February, fund managers were far more concerned about monetary policy, inflation, asset bubbles, and recessions. Only 7% of respondents identified the โRussia-Ukraine conflictโ as a top risk; that was up from 0% in January. A Deutsche Bank survey conducted around the same time came to a similar conclusion. (Read more of our geopolitical risk thoughts here.)
Barring some other unexpected event, it wouldnโt be surprising to see the Russia-Ukraine conflict jump to a top risk when BofA publishes its March survey later this month.
But at that point, ironically, the market may have already priced in most of the downside risk.
To better understand, itโs helpful to look back at how markets reacted to the emergence of two prior top risks.
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