Let's revisit the prevailing risks that I had earlier highlighted and see where we're at with those:
(1) The US-China trade war
There is a difference in opinion between Trump's advisers on whether the existing tariffs should be rolled back. Larry Kudlow had earlier announced the likelihood of the rollbacks as China pressed for it to be a condition for a Phase 1 agreement. But China hawk Peter Navarro sees it differently and thinks that would be a concession US should not agree to especially as US is still circumspect how far they can get China to the table on the larger and more intractable issues that would form part of later phases of negotiation. In the end it would be POTUS making the final decision, but IMO he will make that decision closer to Dec when it is now due for signing. That would allow him time to determine if he needs the silver bullet to win back public support if and should the impeachment enquiry starts to put heat on him. But China would continue to insist the rollback as a way to progress and not stall the negotiation because it is clear that Wall St depends on it and so does public support for the Prez. So it could come down to if POTUS thinks he will still come out unscathed from the impeachment process and if he believes so, he may be less likely to agree to the rollback but instead in phases or concede partial rollback as an alternative. So it remains to be seen if the US markets would be happy with that, as clearly a hopeful full resolution as is probably imputed by US markets at this stage is false optimism. This still has a bit more to play out and I think the markets may have got ahead of themselves at this point.
(2) Impeachment
We will in the weeks ahead be hearing a public enquiry into the impeachment and the US public will get to hear themselves presented evidence of the President's misdemeanours - Senate Republicans continue to defend the indefensible and so Wrong May Stay Wrong for Longer, and so the markets have all but written off any prospects for concern for POTUS removal from office. As I mentioned, if this turns the table for an unlikely impeachment, the US markets could crash.
(3) Brexit
Brexit is no longer regarded to be much of a risk now given the unlikely occurence of a Hard Brexit. The main risk arising here is a hung Parliament outcome if the Conservatives are unable to garner enough support as this election tantamounts and positioned (by Liberal Democrats and SNP) as a sort of second referendum for those who support Remain. A hung parliament would continue to entrench prevailing uncertainties for businesses in UK and Europe, likely to tilt these economies into a recession in Q1 or Q2 of 2020. When recession starts in Europe, it would be matter of time it reaches the US.
(5) Global Economy
The confidence factor is very important in the key levers of economic expansion, namely public consumption and capital business investments. More so than ever, political decisions are now playing the greatest part in influencing confidence but the likely scenario is more muddling and uncertainty. We all know that economic data lags actual economic experience on the ground , so it is not uncommon for data to report a recession only a few quarters after it has already occurred. In some sectors of the economy, it is almost like recession has already begun. The economic data you see is aggregated just like the stock indices, it masks the actual degree of pain felt by certain business community and even downplays the extent of adversity the real economy is already facing.
