A black swan is a term used to describe an event that comes as a complete surprise and has a major impact. It’s usually a singular event, but sometimes there can be more than one such shock to the system .. just like 2016 when Leicester City won the league and Portugal won Euros beating France on its home turf.
Black swans are unknown unknowns that are impossible to predict, but Azad Zangana, the senior European economist and strategist at Schroders, has predicted three black swans for 2019.
Eurozone crisis mk2
Zangana believes that the gradual withdrawal of QE by the ECB will result in tighter liquidity and could potentially result in another Greek-style crisis in the Eurozone.
In his view, Europe doesn’t have the mechanisms in place to prevent another occurrence as it is yet to complete the banking union and is not a fiscal union. President Macron has proposed a fund to support growth in such circumstances, but this has yet to be created.
Greece is not the only market that could give the Eurozone trouble. Bond markets breathed a sigh of relief when the Italian budget for the coming year was finally agreed. But, given the aims of the populist coalition, the drama could be played out again this year.
A crisis would force the ECB to delay rate rises and even re-start the QE programme. And as Zangana points out, force the EU into making further reforms to prevent this happening in the future.
We’re all sick and tired of Brexit, and the idea of not leaving so close to the deadline seems impossible given how much time the government, parliament and the country have devoted to it. But Theresa May’s Brexit deal lacks broad support and could be rejected a second time.
This would force the government to extend or cancel article 50 instead of crashing out of the EU without a deal (although many extreme Brexiteers want exactly that). Political chaos, votes of no confidence and a general election are therefore all on the cards — increasing the chances of the UK staying in Europe.
Trump doesn’t run in 2020 (hurray!)
Trump loves himself as much as a campaign rally, but now that the Democrats control one of the houses, his blunt and brash bash-them-over-head negotiation technique is no longer garnering results and he’s starting to lose patience with politics.
Another thorn in his side is the Mueller investigation on involvement with Russia in the 2016 election. He is already the oldest person to be elected president, taking office at the age of 70 and would be 78 if he served a whole second term, so (mental) health may be a factor. And, as he gets bored very easily, he could simply decide to do something else. There have been talks Donald Trump founding a media empire – Trump TV anyone?