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Never Mind Black Swan Predictions, Here's 10 "Unlikely But Plausible" Events

Tom Burroughes

25 January 2017

The term “black swan” has become common parlance in finance, as have expressions such as “tail risk” or “ahead of the curve”. In plain language, a black swan event is, according to one online definition, an “event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict”. The term was popularised by Nassim Nicholas Taleb, a finance professor, writer and former Wall Street trader. Black swan events are typically random and unexpected.

But as readers know, there is innovation not just in finance but the language used about it. Taking wing, so to speak, is the “gray” swan (to use an American-English appellation) coined by State Street Global Advisors. These creatures represent “unlikely but plausible” scenarios. 

So, at the early stages of the year, here are 10 predictions of such unlikely but plausible events that might affect wealth managers’ lives this year. We urge readers to respond. They can do so by emailing

China loses its grip on markets and economic growth. Playing a central role in the global economy and emerging markets in particular, China again tops our list as the leading gray swan for 2017 - this time for failing to control its currency and financial markets or to manage an orderly slowdown of its economy.

Election surprises push the European Union closer to break-up. With a packed electoral calendar in 2017 - including general, presidential and federal elections in the Netherlands, France and Germany - the risk of another shock to European integration from the ballot box is very real.

The Fed again. Oil-producing nations may have reached an agreement to reduce supply, but any one country’s non-compliance with the voluntary cuts could lead to a swift collapse of solidarity and a ramping up in global oil inventories, renewing the downward pressure on crude prices.

Emerging markets get squeezed. The protectionist rhetoric of the Trump campaign translates to new restrictions on global trade, dramatically limiting accessibility to US markets just as emerging markets are struggling with the stronger US dollar and higher US interest rates.

Productivity surges to the upside. For no other reason than a simple reversion to the long-term trend that typically prevails over the business cycle, the economy experiences an improvement in productivity growth, which has been lacking so far in this expansion.

Trade wars break out. Trump’s actions to force changes in trade relationships could be seen as a foreign threat that other nations need to address aggressively, imposing their own restrictions on the imports of US goods - with China in particular having little to lose and much to gain by retaliating.

Cyber terrorism escalates into cyber war. Beyond criminal operatives stealing personal data or sovereign states attempting to influence foreign elections, cyber attacks orchestrated by rogue nations remain a key risk, possibly taking the form of terrorism to weaken local infrastructure or confidence in global markets.

Health care becomes a policy battlefield in the US. After the hasty repealing of Obamacare before a viable replacement has been legislated, the US president and Congress play hot potato with health care while consumers, doctors, drug companies and other providers of medical equipment and services are left in the dark.

New international alliances form. Long-standing geopolitical and economic alliances have come under pressure in recent years, and if the US cedes ground by scrapping current agreements, 2017 may see new coalitions come together to replace the existing global order, with China stepping in to fill the void.