Monday, December 4, 2020
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The risks that no one has talked about will cause more market damage
When investors think about where the stock market will go in the future, they may also be thinking about what might go wrong.
In a new monthly survey, Deutsche Bank asked its customers to “identify what they consider to be the biggest risks to global financial markets by 2021.” The company provided a list of options for respondents to choose from.
“Interestingly, all concerns about the vaccine fill the top 3, although while this is a good consensus for 2021, a successful vaccine release will still come as a surprise in relation to expectations,” Deutsche Bank strategist Jim Reid said Friday.
In fact, though, investors can count on something Is expected Will happen In fact Occurrence, the small amount of uncertainty, will prevent that event from being fully priced in the market.
Conversely, you could say that the items identified in the table above may be somewhat ready for investors to misbehave.
But what about the risks that are not covered here (or what <5% of people who answered the question said "none of these")?
Well, unrecognized risks are often classified as highly unlikely because they are not worthy of much thought.
Unfortunately, unidentified risks can cause more damage when they are effective. Consider 2020. When this year comes, some could have imagined that we would face a global epidemic that will force the majority of the economy to stop. It is this unpredictability that leads this risk to lower prices in the market, so the stock market crashes just like that.
To be clear, we do not recommend that investors start thinking about potential risks. If investors are always too worried about everything that could go wrong, risky assets like stocks will never be enough.
However, investors need to understand that unforeseen events are happening and that the stock market will fall once in a while.
The good news is that the stock market has a steady record Recovers vertical losses And mobilization for new records. So, investors who have time to invest should not avoid stocks for fear of the next accident, but keep in mind that in the short term things can go wrong and offer a buying opportunity.
Issued by Sam Roe, Executive Editor. Follow him on Am Samro
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