From Ukraine to Gaza, geopolitical risks are weighing heavily on investors’ minds. But there are plenty more out there that may not be getting headlines.
Victory for the "Yes" vote at the Scottish independence referendum in September could send the UK economy into a tailspin. Photo: Shutterstock
US mid-term elections
Risk: Republican victory in the
Senate and House results in lame duck presidency, derailing the US recovery.
Obamacare and a general ennui
with the presidency means the Democrats could be in for a pasting later this
year when voters go the polls. If the President loses control of Congress he’ll
be unable to push forward reforms, but more importantly the feeling of being
rudderless could knock investor confidence and dent the recovery. A reversal in
the economy could mean the Fed is unable to raise rates next year as planned.
Scottish independence referendum
Risk: Voters say "Yes" to Scottish
independence referendum, sending UK recovery into reverse gear.
Victory for the 'Yes' vote could
see a messy dispute between Edinburgh and London as they define the terms of
independence. It would send shockwaves through UK markets as they wrestle over
the pound and Scotland works out its currency options. Businesses could head
south, while investment north of border could come to a halt until there is agreement. More importantly, perhaps, the UK’s very existence would be called
into question; Britain’s stake at the top table of the UN and G7 no longer
assured - the fallout for the UK economy could be enormous and send the pound
into reverse gear.
Anti-corruption drive in China
Risk: Political backlash from
anti-corruption drive in China dents business confidence in Asia’s economic
powerhouse, harming the global recovery.
Beijing is ramping up its
anti-corruption efforts and increasingly those in the commercial sector are
fearing they could be caught in the net. After years of grab-what-you-can
growth there are many whose records are not completely clean. The problem is
that by going after individuals China risks dismantling chunks of its economy. Even rumours about a chief
executive can hit investment and derail contract negotiations, with all the
knock-on effects this can have on the economy. Just the spectre of investigations is having a chilling impact on
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