BCA Research strategists Matt Gertken and Jesse Anak Kuri have identified five potential ‘Black Swan’ events that could trigger significant market shocks. In a strategy note released this week, the strategists highlighted these risks, noting that they are more realistic in the current climate than investors might want to admit. BCA Research is an independent investment research firm providing global strategy and foreign exchange services. The company provides macro strategy, commodity and energy strategy, and emerging markets strategy, among other research.
The list of potential black swan events includes an Iranian regime collapse leading to a historic oil supply shock and global recession, and a Chinese technological breakthrough that devalues US tech stocks. Further risks outlined involve China projecting power abroad and triggering a massive chip shortage, a potential military conflict between Russia and NATO, and the United States potentially abandoning NATO.
The strategists assigned probabilities to each event, estimating a 38 per cent chance of an oil shock, a 32 per cent chance of Chinese hybrid military tactics, a 50 per cent chance of a tech bubble burst, a 10 per cent chance of a Russo-NATO war, and a 30 per cent chance of the US harming NATO.
In light of these risks, the strategists recommend an overweight position in US equities and emerging markets, excluding China. They advise waiting for signs of Chinese economic stimulus before diversifying further away from the United States.
