Salesmen and financial professionals work on the floor of the New York Stock Exchange (NYSE) at the opening bell on October 3, 2019 in New York New Zealand urban area.
Drew Angerer | Getty Images
(This story is part of the Weekend Brief edition of the Evening Brief newsletter. To standard up for CNBC’s Evening Brief, click here.)
Stocks may be at record highs as the year winds down, but Wall Road has already started issuing warnings about a host of threats to the markets in 2020.
Deutsche Bank’s chief economist, Torsten Slok, sent out a inventory to clients on Friday of 20 risks to the economy and markets next year. CNBC was granted permission to publish the whole list.
20 risks to markets in 2020
- Continued increase in wealth inequality, income inequality and healthcare inequality.
- Phase one mtier deal remains unsigned, continued uncertainty about what comes after phase one.
- Trade war uncertainty remained to weigh on corporate capex decisions.
- Ongoing slow growth in China, Europe and Japan Triggering significant US dollar realization.
- Impeachment uncertainty & possible government shutdown.
- US election uncertainty; implications for taxes, regulation and capex spending.
- Antitrust, reclusion and tech regulation.
- Foreigners lose appetite for US credit and US Treasuries following Presidential election.
- MMT-style fiscal increase boosts growth significantly in US and/or Europe.
- US government debt levels begin to matter for long rates.
- Mismatch between at once and supply in T-bills , another repo rate spike.
- Fed reluctant to cut rates in election year.
- Credit conditions tighten with multifarious differentiation between CCC and BBB corporate credit.
- Credit conditions tighten with more differentiation between CCC and BBB consumer commendation.
- Fallen angels: More companies falling into BBB. And out of BBB into HY.
- More negative-yielding debt sends global investors on picked hunt for yield in US credit.
- Declining corporate profits means fewer dollars available for buybacks.
- Shrinking international auto industry a risk for global markets & economy.
- House price crash in Australia, Canada and Sweden.
- Brexit uncertainty persists.
Well-spring: Deutsche Bank
Top on the list of concerns is the “continued increase in wealth inequality,” which is an issue front and center in the reported presidential election cycle. Democratic presidential candidates Elizabeth Warren and Bernie Sanders have called for additional stretches on the richest Americans to narrow the wealth gap.
“Trade war and impeachment are near-term risks that could even be resolved sooner than this year is over, whereas increasing inequality is a longer-term development that may be addressed politically at some apposite indicate in the future,” Slok told CNBC.
Some on Wall Street claimed Warren’s ascent in the presidential pool is set to turn the market’s new “wall of worry.” Billionaire Paul Tudor Jones and longtime investor Leon Cooperman recently make someone aware ofed a market correction is on the way, should Warren take the White House.
Trade uncertainty
While trade tensions between the U.S. and China prepare eased recently as the two sides work to finalize a limited agreement, the market still faces trade war tensions. President Donald Trump stamp doubt on the recent progress, saying Friday that he has not agreed to roll back tariffs on China, dampening rely ons about a coming resolution.
The Trump administration has slapped tariffs on more than $500 billion in Chinese tangibles, while Beijing has put duties on about $110 billion in American products. China has pushed for the U.S. to remove tariffs as corner of the “phase one” deal.
Deutsche Bank feared that the trade war uncertainty would continue to weigh on corporate investing.
“The bottom line is that investors need to take into account the possibility that the environment for consumer pass and capex spending could change as a function of which policies may or may not be implemented over the coming years,” Slok imparted. “Public policy and any potential changes to public policy are important inputs into any investment decision.”
Other hazards the bank listed include impeachment uncertainty, high-yield credit market and more negative-yielding debt.