InvestmentsMay 21 2018

Ten things that could cause financial Armageddon

  • To be able to explain to clients what effect certain events might have on their portfolios.
  • To ascertain which risks might be most likely to have an effect.
  • To understand how to structure portfolios to mitigate risk
  • To be able to explain to clients what effect certain events might have on their portfolios.
  • To ascertain which risks might be most likely to have an effect.
  • To understand how to structure portfolios to mitigate risk
pfs-logo
cisi-logo
CPD
Approx.30min
pfs-logo
cisi-logo
CPD
Approx.30min
twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
pfs-logo
cisi-logo
CPD
Approx.30min
Ten things that could cause financial Armageddon

International and intra-national conflicts appear to be on the rise. Several potential flashpoints could disrupt energy and raw material supplies and spook global markets. Key here are tensions between the UK, US, and Russia, Saudi Arabia and Iran, and Gulf coalition countries and Qatar.

While armed engagement in the South China Seas seems lower on the risk register, there is still significant potential for flashpoints between the US and China that could set the world on edge. 

5) Brexit downturn

While peace may have broken out between Britain and the EU, the medium to long term outcomes remain uncertain. A poorly managed Brexit could be calamitous, triggering a prolonged global recession.

As the March 30th 2019 exit draws closer, the UK could become mired in the change process. Most government departments will have to focus on extraction from the European Union (EU) and putting in place mechanisms to replace those of the EU.

The costs of withdrawal, implementing new systems such as customs, and recruiting staff into government could sets cuts in welfare payments. 

Foreign companies may accelerate withdrawal of key operations from the UK and automation may accelerate as firms reduce risks by cutting staff costs - swapping machines for humans. Markets may be further unsettled by transition uncertainties and an extended rebalancing period for the economy.

The outcome could see massive public and private sector job cuts, rising import costs, significant declines in government tax revenues, consumers switching from spending to saving, and higher levels of personal debt.

Uncertainty could also drive more company failures, declining corporate investment, a growing number of empty commercial buildings and retail outlets, falling domestic and commercial property prices, rising poverty levels, and higher social welfare costs.

In response, share indices could fall 50 per cent or more, with GDP collapsing some 6 per cent to 10 per cent, the pound reaching dollar parity, and unemployment hitting 20 per cent. The UK economy could nosedive into a multi-year recession. 

6) Global economic slowdown

Since the financial crisis, many economies have stabilised, enjoying increasing GDP, rising employment, and stock market growth. However, the factors above could trigger abrupt global retrenchment.

Furthermore, contagion effects from the Brexit scenario could engulf the planet fuelling further chaos. Additional contributory factors could include rising nationalism, more widespread tariff barriers.

Domestic debt problems, declining consumption, and tougher export markets could also hamper global growth engines like China India, Indonesia, Germany, Mexico, the Philippines, and Malaysia.

7) Technology sector collapse

 A technology backlash could lead or amplify global market reverses and economic decline. Apple, Alphabet (Google), Amazon, Microsoft, and Facebook are the five most valuable public companies on the planet by market capitalisation.

PAGE 2 OF 5