CHICAGO (Reuters) – Having been a stock market investor during the worst downturns over the past quarter century, I’m naturally cautious about national economic shocks like recessions, inflation, bubbles and wars.
None of those threats have disappeared from my radar screen. But being a squeamish investor, as I’m watching the steady ascent of the U.S. stock market this year, I have one question: What should you be most afraid of?
I share the caution espoused by former Treasury Secretary Robert Rubin, whom I heard speak at the Chicago Council on Global Affairs on Thursday. “I’m an investor – a troubled investor – with a very deep concern,” Rubin said. “If we (the U.S.) don’t get on a sound fiscal trajectory, there will be a severe crisis in the bond and currency markets.”
I also share Rubin’s other concern that markets could be tripped up by a European debt default. That seems less likely with the passage of time, although it’s certainly on the table. Even though I have issues with Rubin’s role in overseeing disastrous financial deregulation in the 1990s, he’s still a keen observer of markets.
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Will there be another U.S. debt-ceiling brouhaha? We have about eight months before that might happen, and it could be another grotesque event for the markets. There’s also the threat of trouble with Iran leading to higher oil prices, although the stock market hasn’t quite reacted to that yet. What about the prospect that investors buying U.S. debt will demand higher interest rates because of the increasing perils of investing in an overleveraged country? That one is beginning to give me agita.