The global economy affects everyone, and it is haunted by some serious risks!
The stock market could crash. Protectionist trade policies might backfire leading to job losses. Or housing booms in some countries could go bust.
The Organization for Economic Cooperation and Development (OECD) looked into its crystal ball Tuesday, and warned that while the global economy is slowly improving now, these are some of the shocks that could derail the still-fragile recovery in the not-too distant future.
Rising protectionism could hurt jobs.
The OECD never mentions President Donald Trump by name it is report, but the Paris based organization made it clear it does not endorse his “America First” trade proposals, or the broader protectionist zeitgeist sweeping across the United States, Britain, and Europe.
“A roll-back of existing trade openness would be costly,” the OECD warned, noting an increase in trade barriers in the major global trading economies like the United States, Europe, and China could adversely impact GDP and jobs in those places.
The warning comes with a chart, showing about 10% of American jobs are linked to global trade. In the United Kingdom, that number is over 20%, and in Germany, it’s near 30%.
A stock market correction.
Stocks have surged to record highs recently, even though interest rates are also starting to rise and long-term forecasts for economic growth have barely changed.
The OECD warns that a “snap-back” in markets may be in the cards, as investors reassess this disconnect between equities and fundamentals.
“A sharp reassessment by markets of the future path of interest rates could result insubstantial and widespread re-pricing of assets that have been supported by low bond yields,” the OECD report said.
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