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Economic Affairs
Beware the tail risks that could upend markets in 2023
These include sticky inflation, a debt crash and an escalation of the war in Ukraine
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Before we let “optimism bias” get the better of us, it’s only prudent to pause and consider some of the tail risks, says the writer.
PHOTO: AFP
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Consider the market mayhem of 2022: more than US$30 trillion (S$40 trillion) wiped off the value of global stocks and bonds; the MSCI All-World index of developed and emerging market stocks tanking 20 per cent, the biggest fall since the global financial crisis of 2008; the benchmark S&P 500 down 20 per cent and the tech-heavy Nasdaq down by one third.
Even yields on 10-year US Treasury bonds, deemed the safest investments in the world and a benchmark for many fixed-income assets, have soared, which means their prices have fallen, leading to massive capital losses.
