Quantifying The 6 Downside And 2 Upside Risks To Global Markets

Tyler Durden's picture

While much attention has been paid to what Draghi has 'talked' about doing, what Bernanke 'is' doing, what EU Leaders 'are not' doing, and what US politicians 'will not' do - the world's risk markets remain on edge. Admittedly, for now, that edge seems biased to the 'we-believe' side of the fence. However, as Deutsche Bank notes, in their wonderfully succinct chart comparing the impact and probability of potential upside and downside risks to global markets, it is economic (or real!) data that should worry investors the most - though we still fear the Kubler-Ross 'denial' stage that in which Spain/Italy/Portugal/Greece remain mired.


Risk Matrix:

the shift in (1) is over the past month


Downside Risks:


Upside Risks:



Source: Deutsche Bank

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
pashley1411's picture

Nice that they put (7) in the far far far left.   Politico's there will fight to the last subsidy.  

sunaJ's picture

The number one risk is letting your wealth go into the digital matrix of this ponzi where the lions are now more prevalent than the prey.  Hold on to your wealth.  Make it real, make it close - make it real close - and make it count.  "But, but I know the ES500 will be heading 40 pips over alpha as soon as oil tops..."  Stop and listen to your own insane nonsense.


JustObserving's picture

Why worry about the $16 trillion debt when the fiscal gap (unfunded liabilities) is $222 trillion:


The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast -- the Alternative Fiscal Scenario -- is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference -- this year’s true federal deficit -- is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.

This fantastic and dangerous growth in the fiscal gap is not new. In 2003 and 2004, the economists Alan Auerbach and William Gale extended the CBO’s short-term forecast and measured fiscal gaps of $60 trillion and $86 trillion, respectively. In 2007, the first year the CBO produced the Alternative Fiscal Scenario, the gap, by our reckoning, stood at $175 trillion. By 2009, when the CBO began reporting the AFS annually, the gap was $184 trillion. In 2010, it was $202 trillion, followed by $211 trillion in 2011 and $222 trillion in 2012.

Part of the fiscal gap’s growth reflects changes in policy, such as the Bush and Obama tax cuts, the introduction of Medicare Part D, and the expansion of defense spending. Part reflects “natural” growth of existing programs, including growth in Medicare and Medicaid reimbursement rates. And part reflects the demographic time bomb U.S. politicians are blithely ignoring.


Other sources estimate US unfunded liabilities at $120.7 trillion and growing at $6.8 trillion a year.  In any case, these unfunded liabilities dwarf the debt.



falak pema's picture

Merkel told the world that she will take her time to resolve the banking consolidation. Apparently she does not feel any urgency. 

What does she know about whats in those tea leaves at the bottle of the kettle?

The world holds its breath, the spaniards are sharpening their knives and the french are abandoning their mistresses. 

The english are ready to swim the north sea to Iceland. 

Will the Chinese buy the core Eurobonds and will Qatar bail out Italy? 

Meanwhile Draghi has just pulled the rug from under Ben's feet, who will pull down the curtain on Euro weakness; which will piss off Lady Lagarde, who is making noises that the banks are now the most dangerous systemic risk thru continued misuse of ZIRP/NIRP for speculation and not productive lending to businesses. 

We are back to square one and the level of debt is now 16T and collective BS of CBs + 3T.

Prospects for growth pretty thin. If a monetary zone cannot devalue, cannot write off debt, cannot achieve growth, how does it stay afloat to survive default? 

Has the euro a self inflatable buoy that is lined with a fifty year bonding system which says no repayment of principal; whatever outcome? Have the USD, £, Yen similar silver linings.

The ninth protocol to this scenario is missing, its called Karma of Pax Americana/First World economies.

LMAOLORI's picture



Plosser better watch his back he might be found somewhere face down with this kind of talk

HOT: Fed Prez Spills the Beans on the Excess Reserve Inflation Time Bomb

Dow drops 100 after Fed official's warning

Racer's picture

Upside risks...



razorthin's picture

If 7 happens it will mean global hyperinflation overnight - the waterfall effect.  Hell on earth.  Survivors would offer a limb for the relative relief of stagflation again.

devo's picture

Where is war?

JuliaS's picture

Sinking is a downside risk, unless the ship capsizes. Then it becomes an upside risk.

are we there yet's picture

The future is fairly clear. Continued QE, eventual EU bankruptsy, china hard landing, these 3 declines hurting each other further.  In 2 years gold will double to 3100 to 3700/oz.  In 2 to 3.5 years the US will have selective spots of debilitating civil unrest. Homeland security is intelligently prepairing to minimize and contain unrest if/when it starts.  Congress and the president will give nice speaches.  Invest accordingly.

wcvarones's picture

You forgot the #1 upside risk:

Zimbabwe Ben goes Full Retard.  Impact: high.  Probability: high.

Moon Pie's picture

Can you say...

*J*U*B*I*L*E*E* ....without smiling?

Or can you say @W@A@R@ without barely moving your lips?


"Up on Housing Project Hill
It's either fortune or fame
You must pick up one or the other
Though neither of them are to be what they claim

If you're lookin' to get silly
You better go back to from where you came
Because the cops don't need you
And man they expect the same."   - Bob Dylan, Just Like Tom Thumb's Blues

Moon Pie's picture

also...wcvrones...love your icon, agree with you totally....but...

can you and maybe others here lay off the "retard" term a bit at least?  I have a sister with down syndrome and i used to get in fights when I was a kid when someone used that term towards her.....not only that....but she is by far more wise than BernanQE....or most other mental dromedaries or fiends at the helms of our forsaken economies....

love ZH, love you guys/gals....just sayin...


Grand Supercycle's picture


Due to recent central bank intervention and short covering spikes, these daily charts are extremely overextended and significant correction expected very soon:




are we there yet's picture

Really? Sell off and correction within 2 months of a presendial election?  That is improbable investment advice.