Societe Generale is out with its famous quarterly black swan chart.
Black swan events are those that have a low probability of occurring, but also have the potential to roil financial markets if they occur.
With a 30% probability, a Chinese hard landing (four straight quarters of below 5% growth) poses the most significant downside risk, according to SocGen.
They think the likely triggers will be domestic issues. "This, however, is not the case for several other emerging market economies where financial integration has delivered several benefits, but also leaves these markets vulnerable to a US Treasury markets selloff."
"To our minds, markets may be placing too much confidence in central bank "puts". Indeed, we believe that in the vent of downside risks appearing in the US, the hurdle for new QE is high as the Fed clearly sees both benefits and costs to this policy. Common to all the major central banks are new responsibilities on financial stability, and surveillance of leverage has clearly increased. In the euro area, the visible political divide leaves the region vulnerable in the event of new shocks. Finally, geopolitical risks merit on- going attention."
Meanwhile, the biggest upside risk comes from "faster-than-expected credit expansion" in all regions.
Societe Generale