BNP: China liberalisiert Leitzins - die nächsten Schritte

Managing risk comes with challenges. Correlations and volatility fluctuate over time, drawdown limits need to be set and a risk budget must be determined. Long-term data series of financial asset prices facilitate this task. Dealing with uncertainty is another story. Time series are lacking and statistical probabilities cannot be estimated. Scenario analysis, focusing on how certain events can trigger future developments, becomes important. A key question is whether the fundamental drivers are influenced only temporarily or more permanently. Another question is the economic cost of uncertainty. Academic research has shown that uncertainty is equivalent to a fall in demand. Finally, confidence in economic and cash-flow forecasts will also decline, weighing on asset prices.

From the outset, important political developments were on our radar this year, with the US mid-term elections in November and the European parliamentary elections in May. The outcome could strongly influence how the market perceives economic policy making, particularly important in the eurozone as despite the cyclical upswing, structural challenges remain. In addition, there are numerous elections this year in emerging markets, several of which suffered from the market turmoil in January: Turkey, Indonesia, India, Brazil, etc. Ukraine, where events are unfolding fast, must now be added to the list of potential political flashpoints. The reaction of global markets has directionally been as expected, yet to a limited extent. This is comforting for now, but uncertainty prevails. It’s an additional factor to take on board in what promises to be a challenging year.

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