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BCA’S GEOPOLITICAL BLACK SWANS FOR 2025
BCA Research has compiled a list of five Black Swan geopolitical risks for this year, which it says are low-odd scenarios that were they to occur would have a major impact on global financial markets.
These risks, compiled by Matt Gertken, BCA’s Chief Geopolitical/US Political Strategist, are:
China reverses course and prompts a “monster rally” in Chinese and offshore stock markets. “We are not talking about just increasing fiscal stimulus – which we fully expect this year – but comprehensively changing course to revive the economy, capitulate to Trump on trade, and avoid strategic confrontation with the West.”
U.S. President Donald Trump negotiates a nuclear deal with Iran, removing a major supply risk and leading to a drop in oil prices. This “would consist of Trump’s team restraining Israel and negotiating a deal with Iran to freeze its nuclear program and thus prevent full-scale war.”
Trump reneges on NATO, which is then exploited by Russian President Vladimir Putin violating a NATO member’s sovereignty. For example, “if Russia staged a provocative hybrid military action against Lithuania in the Suwalki corridor and Trump failed to respond, NATO’s collective security guarantee would suffer irreparable psychological harm.” This would initially hurt the euro. Eastern European currencies and assets would then also face a permanently higher risk premium.
The United States stages a military intervention in Mexico. “The US’s main objective is to make allies and partners pay more for US security benefits. But US military action across the Mexican border could cause an unexpected crisis.”
Countries agree to coordinated FX intervention to devalue the U.S. dollar. “The US’s problem is insufficient savings, an overvalued currency, and large trade deficits.” Other countries that run large trade surpluses may offer appreciation in their currencies to stave off Trump’s tariff’s threats and rebalance the global economy. “The implication would be hugely negative for the greenback this year.”
(Karen Brettell)
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