What if President Trump and the GOP manage to successfully pass a tax cut plan? S&P and other forecasters estimate an 11% rise in earnings if corporate tax rates can be cut to 20% Rising earnings should continue to drive the market forward at a similar pace Rising rates and inflation are potential risks as the US government deficit widens rapidly.
What if North Korea and South Korea fall back into armed conflict as a result of aggression by the new leader Kim Jong Un’s regime? A real conflict in Korea would impact the Asian region as investors shunned risk throughout northern Asia. A serious conflict would result in the collapse of the North Korean regime, resulting in a potential intervention by China and the United States. The conflict would likely end quickly, but could result in significant damage to S. Korea’s economy and world trade.
This scenario covers the heart of the global financial crisis, from the collapse of Lehman Brothers until the market lows of early 2009, and examines the max draw downs of key levers over that time frame.
What if the US is unable to make meaningful reforms to Social Security funding resulting in a likely 25% benefits cut in the 2030s? Social security funding unchanged, leading to 25% benefit cut in 20 years. Younger boomers forced to accelerate asset liquidation, pulling assets from market. Lack of spending compounds demand problems seen in economy today
What if tech company valuations normalize, erasing the recent outperformance by the Nasdaq? The Nasdaq has outperformed the S&P 500 by roughly 10% over the last year Drop in tech valuations might start in private funding (VCs) and spread to public markets A mild correction in the Nasdaq might ensue, with lesser impacts on other major equity indices.
What if the S&P has a minor correction and falls 10% over a short timeframe? While S&P and Nasdaq both fall 10%, a short correction has little impact on economic metrics Treasury rates would fall as investors flee risk Commodities like oil might fall as fast as equities