First, concerns that trade strains will ratchet up further, amplifying the numerous attacks on free trade made throughout 2018 at the US President’s initiative. Second, concerns that Chinese authorities will lose control of the business cycle, being unable both to stimulate demand in the short term and to tackle the debt overhang in the medium term. Third, concerns that central banks will abruptly cut off liquidity taps to the markets (prolongation of quantitative tightening in the US, end of quantitative easing in Europe) and raise the cost of financing the economy (policy rate hikes in the US, preparation of the exit from the zero/negative interest rate policy in Europe). Other problems of secondary importance, or at least with more limited repercussions, could be added to this list, such as the crisis in the German automotive industry, the bout of social unrest in France, vain attacks by the Italian government on the Commission and, last but not least, the political psychodrama of Brexit.
In recent weeks, the three major risks that we have just named – trade war, Chinese hard landing and monetary tightening – have all evolved in a positive direction. This does not mean they have been resolved once and for all, but they have less chance of materialising.