US stock investors have had a lot to worry about in August, with an escalating US-China trade spike and a short inversion of a key figure price that helped send stocks to their worst performance in the first half of a month in 2019.  Dow Jones industrial average
DJIA, + 1.20%
is down 3.7% on a monthly basis, S&P 500
SPX, + 1
has fallen 3.1% and the Nasdaq Composite index
COMP, + 1.67%
has lost 3.4%.
But even when high-probability risks – such as US-China trade conflicts – catch investors' heads, there is a growing combination of lower-probability risks, so-called gray swan events, that can individually or in combination create even more heartburn for investors as the third quarter nears the end.
1. No-deal Brexit: The deadline for October 31 for the UK to reach an agreement to exit the EU in an orderly fashion is fast approaching, and newly elected Prime Minister Boris Johnson has signaled that he is willing to face the consequences of a non-deal Brexit, "come what may, do or die." .
The British Budget Responsibility Office estimated in July that a Brexit non-deal would put the world's sixth largest economy in recession. The European economy, already shaken by the global downturn in industry, will also be adversely affected by new trade barriers and uncertainty that would flow from Britain's leaving the EU.
2. Car tariffs: An even greater threat to the European and global economies could be a significant increase in U.S.-EU trade tensions. On May 17, the Trump administration announced its provision that US imports of cars and car parts pose a national security risk, setting the stage for tariffs of up to $ 128 billion in car tariffs from the EU and Japan, which would be the main targets of new taxes
See also: Trump delays car tariffs for EU, Japan for six months
3. EU-US. trade conflict: Apart from car tariffs, the threat of a wider European-American is. trade conflict loom. Europe was hit by 25% steel and 10% aluminum tariffs imposed in 2018, against which the EU retaliates with a 25% steel tariff against it.
Recent developments are the Trump administration's proposed imposition of tariffs on European aviation manufacturer Airbus SE
EADSY, + 0.50%
with Europe expected to retaliate in nature against Boeing Co.
BA, + 0.75%
. Although rewritten so far, an increase in trade tensions with the EU could be a much bigger deal than China, given the degree of economic integration.
4. Hong Kong protests : Political unrest has been raging in Hong Kong for more than two months as a protest against a extradition treaty with mainland China has metastasized to a broader democracy movement.
Conflict has triggered a 14% decline in the Hang Seng Index benchmark
HSI, + 0.94%
since May, as investors worry about Hong Kong's fate as a global financial center and whether a potential demolition of Beijing could trigger further conflict with the West
5. Italian Budget Drama : While Italy has avoided sanctions from Brussels for not reducing the budget deficit to acceptable levels in 2019, Europe's third largest economy is moving towards a conflict with the European Commission in 2020, when the budget deficit is set to rise to 3, 5% of GDP, well above the 3% limit set by EU rules.
6. Iran conflict : A number of quasi-military clashes between the US and Iran have been largely withdrawn from the oil and stock markets this year, including claims by the Iranian and US military that each of the they had shot down an opposing drone operating near the Strait of Hormuz – a 21-mile high point for global oil supply bordering Iran and separating the Persian Gulf from the Arabian Sea.
These incidents were followed by the tit-for-tat seizure of British and Iranian tankers and threats from Iran to shut down altogether, which would deter the flow of a third of global oil shipments and threaten wider military conflict that could affect the global economy and markets.
7. Currency Wars : Headwinds for US stocks this year have been the historically strong dollar, supported by relatively strong US economic growth and extraordinary monetary stimulus from the European Central Bank and the Bank of Japan.
Central bankers say monetary stimulus is aimed at lowering interest rates in home economies, not devaluing currencies to increase exports, but President Trump has put this reality at the forefront of his attacks, accusing perceived trade rivals of using monetary stimulus to lower the values of their currencies.
The administration has recently labeled China as a currency manipulator while pushing the Federal Reserve to cut interest rates, in part to devalue the dollar. An escalation against currency wars could further sap investor and business confidence, already a significant headwind for global markets.
8. India-Pakistan conflict : The Kashmir region has been a point of (sometimes military) conflict between the two nuclear forces since the partition of British India into independent states in 1947.
Tensions are on the way back after Indian Prime Minister Narenda Modi's government revoked the special status of the Indian state of Jammu and Kashmir in early August, which had given it autonomy and allowed it to introduce laws to maintain its status as India's only Muslim-majority state .
The Indian government then tried to suppress protest by sending thousands of troops to the region; cut internet, mobile phone and landline connections; and arresting Kashmiri politicians. Pakistan downgraded diplomatic relations with India and cut off bilateral trade, and Pakistan's prime minister said he expected the violence to occur.
9. Argentina : The Argentine stock market
fell more than 37% on Monday, after business-friendly President Mauricio Macri lost a primary election to center-left opponent Alberto Fernandez by a margin of 48% to 32%, sparks fears that Macri will lose the elections in October and that Argentina will cut back on the free spending that has led to many defaults and inflation crises for decades.
Barron & # 39; s on MarketWatch: Argentina is facing a leadership crisis and it is a problem for the country's markets
10. All the other trade spat : Other major economies have followed Trump's lead in use trade barriers as tools to force political change abroad. South Korea and Japan have been rooted in a trade war with roots in a decade-long conflict over reparations for atrocities committed by Japan during its colonization of South Korea in the first half of the 20th century.
The United States and India, the world's fifth largest economy, are also sliding closer to a trade war, after India retaliated in June against US tariffs on steel and aluminum, raising US $ 1.4 billion in US imports. Trump responded with an attack on the Indian government, and wrote in a tweet that “India has long had a field day with tariffs on US products. No longer acceptable! "