Tail risks in 2024

The small world note from two weeks ago offered a summary view on the economic and political dynamics that will shape 2024.  Mike O’Sullivan and I argued that 2024 would be characterised as a ‘scramble for supremacy’, as economic and political competition intensifies across and within economies. From strategic competition between geopolitical rivals; to growing competition between 'friends'; domestic political competition in a big election year (notably the US); competition between monetary & fiscal policy in a high debt, high rates world; and growing competition between labour and capital.

The 2024 outlook, and my weekly notes, provide a sense of the risks that we have our eye on: from the intersection of high rates and high debt to the potential for escalation in the Middle East and the looming US Presidential elections.  It will be another consequential year.

But the global economic and political environment is characterised by deep uncertainty.   In a more fluid global economic and geopolitical environment, tail risk events become much more likely: few picked the Russian invasion of Ukraine in 2022 or the scale of the Hamas attacks on Israel in 2023.  The changing global environment fattens the tails of the probability distribution function, with outlier events increasingly likely.

The full note is available at: https://davidskilling.substack.com/p/tail-risks-in-2024