Tuesday, March 18, 2014

What market risks to watch for currently

Investors also should keep a close watch on emerging markets, where the threat of contagion is real, as was demonstrated in January with a worldwide flight from risk because of financial, currency and political uncertainty in Ukraine, Turkey, South Africa, India and Argentina.

A financial crisis in China could be another reason for the market to change direction. Even after the recent surge in local government debt, China's total government debt is a modest 53 percent of gross domestic product. Still, the central bank’s efforts to contain the explosive growth of the shadow-banking system may not work. The leap in short-term rates to 30 percent in June could be a warning sign.