International Forecaster Weekly


Just six months ago, participants in a monthly survey conducted by too-big-to-fail Deutsche Bank were asked, “[What] do you think are the biggest risks to global financial markets in 2021?”

Guest Writer | June 23, 2021

By Dave Allen for Discount Gold & Silver

We talk a lot about that unknown Black Swan on the Financial Survivalpodcast/ radio show – that unpredictable, and often unforeseeable, event that could unravel, really unravel markets at any time.

Sometimes, exhausted at the possibilities, we’re left asking ourselves, Do we even know what we don’t know? 

After all, to get the right answer, you have to ask the right question, right?

Just six months ago, participants in a monthly survey conducted by too-big-to-fail Deutsche Bank were asked, “[What] do you think are the biggest risks to global financial markets in 2021?”

These were the top half-dozen responses (the numbers in parentheses indicate the percentage of respondents choosing that answer):

  • [The] virus mutates and dodges vaccines (38%);


  • Serious vaccine side effects start to emerge (36%);


  • Enough people refuse to take vaccines, thus hampering back to work drives (34%);


  • Tech bubble bursts, causing fallout across global markets given their size (33%);


  • Central banks/governments pull back stimulus too early (27%); and


  • Runaway money supply growth causes inflation to rise earlier than anyone expects (23%).


Today, a mere six months later, top investor concerns include supply chain bottlenecks, labor shortagesinflation and slower GDP growth, according to Axios’ Sam Ro.

Investors Still Concerned About Vaccine Issues

But, in its latest monthly survey, Deutsche Bank was told by clients that the top 3 risks to the global financial markets in 2021” are still vaccine-related (the same 3 as in the chart).

It would be wise to remember that it's the risks that investors aren't thinking about that often do the most damage in markets when they happen. 

Indeed, Ro points out that investors may be confident that something expected to happen will actually happen. Yet, the smallest amount of uncertainty will keep that eventual event from being fully priced into the market.

But, as Ro asks, what about the risks that didn’t surface in the survey or that were considered by the <5% who responded to the question with none of the above?

We ignore those least popular responses at our own risk, because therein probably lays the Black Swan.

We only have to look back to last year. Going into 2020, who among us ever imagined we’d face a global pandemic that would force large parts of the economy to literally shut down

Ro says it’s this lack of expectation that leads this risk to be underpriced in the market, and therefore cause the stock market to crash like it did last March.

But no one’s suggesting that investors should start considering the unlikeliest of risks as though they were likely to occur. 

If investors were always overly worried about everything that could go wrong, risky assets like stocks might never be cheap enough.

However, you should be aware of them at a minimum — to be aware is to be prepared, and to prepare is to set yourself up for success.

Until last week, gold and silver were on a good upwards run after a slow start to the year. 

Yet, their recent correction, I believe, can be attributed largely to how institutional and large retail investors are manipulating gold and silver ETFs almost every day through their high-speed computers and algorithms.

Stocks have rallied almost unabated for over a year now, leaving many to wonder if the market is overdue for a big selloff. Last week's major declines magnify those concerns.

What’s Coming Next?

Jonathan Golub of Credit Suisse believes there are two big dynamics to monitor in the second half:

First, how long does the demand for goods and services outstrip supply, keeping inflation hot? And second, what’s the path to a more normal pace of growth?

As we know, persistent inflation and a disorderly slowdown or rebound are a recipe for market volatility.

Golub is bullish, predicting the S&P will rally to 4,600 by the end of 2021, with what he calls a “benign deceleration” in growth. 

That's where the economy cools to “modest-but-healthy growth” and the market generates “modest-but-healthy returns.”

RBC strategist Lori Calvasina is more cautious, seeing "a little more room for stocks to move up but not a lot." 

She says we could see "a meaningful pullback during the second half, amounting to as much as 8%-9%.”

Among other things, Calvasina cautions that measures of investor sentiment and positioning are at levels that signal the market has peaked — and is about to slide.

Too big to fail Bank of America strategist Savita Subramanian thinks the S&P will fall to 3,800 by year-end.

Similar to Calvasina, she warns that investor sentiment is “near-euphoric” but also believes that wage inflation and potential tax hikes could hurt company earnings.

The bottom line, Calvasina says, "The stock market is not in a place where it can absorb [more] bad news.”

Thus, if it’s true that the degree to which an event will rattle markets is inversely related to how much people are already thinking about it, get ready for a wild ride.

And keep at least one eye peeled to the skies — because that dark formation just could be the Black Swan preparing to swoop down on our realities. 

In fact, I encourage you to read Pam and Russ Martens’ compelling take on this in their latest Wall Street on Paradenewsletter (see article below).