According to the Outlook 2021 Report by JP Morgan, three possible risks have been identified to affect the market: the failure in providing policy support, a raging tech war between China and the United States, and some geopolitical flashpoints.
Policy support has been the major factor that has been driving economic recovery so far in various regions. Of course, some policymakers may hesitate in providing more of such support for reasons such as government debt levels issues. However, most will conclude that the short-term benefits in providing additional support outweigh the potential long-term costs.
The tech war between China and the United States seems to be unending even if the new President-elect of the United States, Joe Biden, engages its administration to lower the heat by adopting a more traditional tone. “The ramifications of this tech war will take years to play out, but the choices each country makes today will impact companies, sectors and even regional economies” states Outlook 2021. Both nations are, at the moment, directing their focus in redirecting their supply chains to fewer volatile partners. They are also engaged in the creation of new domestic production. This in turn adds impetus to invest in commercial R&D and fundamental research for policymakers. As for investors, the focus on innovation may create opportunity in accelerated technological progress.
Conflicts that we anticipated as unlikely to occur around the world such as the military tensions between China and the United States are rising as China presses its territorial claims (in the South China Sea and elsewhere in Asia) has also threatened to distract investors’ attention from the global recovery.