Tail Trouble

The biggest sources of economic tail risk through 21Q4 are, in order of concern, a material rise in inflation, a market taper tantrum like 2013, a new and worse Covid-19 variant, the frothy stock market deflating, and souring relations vis-a-vis China leading to an economic or geopolitical miscalculation. Over the next month by far the biggest risk is Congress not raising the debt ceiling, which would be an unmitigated disaster.