From Goldman’s economists Dominic Wilson:
“After significant equity gains in 2013 and with more of a consensus that US growth will improve, it is important to think about the risks to that view”
Wilson gives 5 key economic forecast risks, and 5 key market risks:
Five risks to our economic forecast
Our central forecasts look for accelerating growth in the DM economies, against the backdrop of continued low inflation and low policy rates.
The main risks to this view are:
- a reduction in fiscal drag is less of a plus than we expect;
- deleveraging obstacles continue to weigh on private demand;
- less effective spare capacity leads to earlier wage/inflation pressure;
- Euro area risks resurface;
- and China financial/credit concerns becomes critical.
Five risks to our market view
Five key risks may affect the mapping of our macro views into the market forecast:
- long-dated real yields rise more sharply;
- markets doubt G4 commitment to easy policy in the face of better growth;
- low risk premia create valuation challenges;
- margins compress more rapidly as wage share recovers;
- and EM assets benefit more from the DM recovery or suffer more from local imbalances
While the points are in reference to equity markets, there is certainly relevance to FX, especially the risk to the euro from point 4 of the first list, and to AUD from point 5
There more at the link
Thoughts and comments welcome. What have Goldman’s missed?
