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4 Risks That Could Upend Markets In 2017

(Kitco News) - Jan. 13 –Increased volatility in the stock market at these lofty, nosebleed levels warns of the potential for a correction ahead. It is well known that market volatility typically increases at both tops and bottoms.

As we enter 2017 and begin to navigate a new economic and political world, there lie many potential boulders in the road for the equity market bull.

As many analysts have warned – the stock market is priced to perfection – the recent rally has priced in expectations that President-elect Trump's proposals will sail through Congress and tax cuts, infrastructure spending and deregulation will fuel stronger economic growth and corporate earnings.

Here's what one analyst had to say:

"This week it has become clear that Trump driven trades
 were overdone? late last year. With Inauguration Day a week
away, the reality that he may not be able to do as much as quickly
as traders had been hoping has started to sink in. The realization
that it's not all sunshine and lollipops and the road ahead could be
bumpy with twists and surprises has sparked significant intraday
 swings and trading opportunities that may continue today."
- Colin Cieszynski, chief market strategist at CMC Markets.

In its fascinating report: Top Risks 207: The Geopolitical Recession, the Eurasia Group outlined a number of risks and warns there are many.

"This year marks the most volatile political risk environment
in the postwar period, at least as important to global markets
as the economic recession of 2008. It needn't develop into a
geopolitical depression that triggers major interstate military conflict
and/or the breakdown of major central government institutions. But
such an outcome is now thinkable, a tail risk from the weakening of
international security and economic architecture and deepening
mistrust among the world's most powerful governments."
- The Eurasia Group report.

Market action: Gold sold off swiftly in November in the wake of the presidential election, but has found a bottom around $1,125. While the jury is still out if that low could be tested, there are a number of major risks on the horizon that argue for a generally higher price trend for gold in 2017.

Here are a just a few of risks that lay on the horizon for 2017.

  1. Global Power Vacuum

  2. It's a whole new ball game with President-elect Trump. His political tilt toward Russia is a game-changer, combined with his weak support for the NATO alliance, potentially create a vacuum of power to oversee global order.

  3. Russians Influence

  4. The Russian government has already proven willing and able to attempt to influence democratic elections –will there be more of this ahead with a number of key elections in Europe this year (France, Germany and the Netherlands). Populism is on the rise, is the European Union vulnerable to chaos or collapse? Consider who wins in this scenario?

  5. Opportunity For China To Gain More Global Influence

  6. In recent speeches, Chinese president Xi Jinping is whipping up support for China to become the new global leader in globalization. Tensions could escalate with the United States amid trade issues. The rise of Chinese global influence in a power grab could be a theme that emerges ahead.

  7. Rising tensions in the Middle East – focused on US embassy location.

  8. Rhetoric is already heating up with Palestinian threats if Donald Trump moves the U.S. embassy to Tel Aviv to Jerusalem. If the new administration moves the US embassy to Jerusalem it would officially back Israel’s exclusive claim to the city, the majority of which was annexed illegally after the 1967 war. The Palestinians, however, also see Jerusalem, as their future capital.

Is your portfolio properly hedged? There are a number of risks that could send equities correcting lower in 2017. Gold is a proven portfolio diversifier and tends to climb when stocks decline. Consider using this period of relative market calm to hedge and protect your assets.

By Kira Brecht,



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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