Allview: Market Risk Monitor

Key takeaways

• Equity markets continue to climb the proverbial wall-of-worry, making new highs in the U.S. in early August.
• The four biggest themes from our list continue to include: two wars that are influencing energy prices, a growing credibility problem for the U.S. Federal Reserve, pockets of potential fixed income defaults, and a constant debate around whether artificial intelligence stocks (AI) have entered bubble territory.
• Given the sharp market response by “bond vigilantes” to Fed Chair Kevin Warsh’s comments after the July Federal Open Market Committee (FOMC) meeting, we’ve moved our U.S. Treasury bond market risk concern up from #6 to #2 this month.
• Reporters and analysts were frustrated that they couldn’t get a straight answer from Chair Warsh. Among the more memorable media reactions were descriptions such as “all bark and no bite” or “all hat, no cattle,” both used to characterize Warsh’s remarks.
• The other change in our rankings for this month came from a reassessment of the probability of a conflict in the South China Sea, moving that risk down from #2 to #6 on our list.