Practical analysis for investment professionals
10 January 2014

Poll: What Poses the Greatest Risk for Financial Markets?

In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers what will be the most important category of risk for financial markets in 2014.

What will be the most important category of risk for financial markets in 2014?
What will be the most important category of risk for financial markets in 2014?

With the heady returns delivered by most major financial markets in 2013 in the rear view mirror, investors are now tasked with worrying about what could go wrong in the year ahead. A plurality of respondents to our global poll, 36%, cited political or geopolitical risks (including government stasis or military conflict) as the greatest threats to market stability, sentiment almost certainly influenced by chronic political dysfunction in Washington, DC, ongoing unrest in the Middle East, and growing tensions in Asia Pacific, most notably between China and Japan, and North Korea and virtually everyone except Dennis Rodman.

Economic health and the risk of recession was top of mind for 26% of readers, perhaps not surprising as the tepid global recovery has been less than inspiring and the current expansion in the United States, now well into its fifth year, is getting long in the tooth by historical standards. According to the National Bureau of Economic Research, the average post World War II recovery — there have been 11 prior to this one — lasted 58 months.

Behavioral factors were cited by 25% of respondents as the primary risk to markets, testament to the notion that investors are susceptible to irrational decision making which can significantly distort asset pricing. Financial risks, like the banking crisis that crippled the global economy just five years ago, was the primary concern for just 7% of readers, while technological and climate-related risks ranked even lower.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
David Larrabee, CFA

David Larrabee, CFA, was director of member and corporate products at CFA Institute and served as the subject matter expert in portfolio management and equity investments. Previously, he spent two decades in the asset management industry as a portfolio manager and analyst. He holds a BA in economics from Colgate University and an MBA in finance from Fordham University. Topical Expertise: Equity Investments · Portfolio Management

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