Bitcoin Crash Among 2018 Worries for Financial Markets, Deutsche Bank Warns
The bull market continues rising, and the economy added a healthy 228,000 jobs last month, so what could possibly spoil the celebrations for consumers and investors in 2018?
A "Bitcoin crash," rising inflation, danger from North Korea and results from special counsel Robert Mueller's investigation of Russian meddling with the 2016 presidential election are among 30 risks for financial markets next year, Deutsche Bank says in a report on Friday.
The risks could boost market volatility and cause growth that is faster or slower than the German bank previously forecast, wrote Torsten Slok, the company's chief international economist.
As for the recent surges and drops in Bitcoin, "you wonder where prices will even be by the end of 2017," Slok said during an appearance on CNBC's Trading Nation broadcast.
Predicting that price swings of the cryptocurrency will remain an issue in 2018, Slok said questions about Bitcoin regulation, transparency and disclosure issues remain unanswered.
"It's mainly because it (Bitcoin price volatility) is something that I think financial markets so far have been discounting as a small issue," Slok said. "We do worry a bit that it could become more systemic, in particular, if the current trends continue into 2018."
Topping Deutsche Bank's worry list is the potential for U.S. inflation rates to move higher in 2018.
Low national unemployment, growth projections for the nation's gross domestic product, and other financial measures signal a potential rise, Slok said.
Continuing U.S. and global uncertainty about North Korea's test launches of longer-range nuclear missiles capable of reaching the U.S. mainland and other potential targets also could roil financial markets. Slok cited fear that we could have a "further escalation of the situation."
The bank's worry list, in random order and featuring both upside and downside concerns for financial markets, questioned whether Jerome Powell, the incoming Federal Reserve chairman, will be "politically driven or driven by the incoming data."
The list also cited the U.S. midterm elections in November 2018, and Mueller's continuing investigation of any ties between Russia's election meddling and the Trump administration.
"Brexit" developments, housing bubble bursts in Canada, Australia, Sweden or Norway, and a harder landing than expected for China as economic growth there slows, also could weigh on financial markets, the worry list indicated.