Investors have enjoyed the longest bull run in Wall Street history but it cannot go on forever, and many analysts are now warning that the world faces a global recession in the next year.
The nervousness is growing as we mark the 10th anniversary of the collapse of Lehman Brothers, which precipitated the financial crisis.
Bull markets do not die of old age, according to the old investment saying, there has to be a trigger and there are certainly plenty out there. Here are four bullets the global economy will have to dodge if it is to remain in good health:
The inverted yield curve
The inverted yield curve is a technical indicator that suggests something is wrong. Put simply, it happens when the interest rate, or yield, on long-term government bonds is lower than on short-duration bonds. Usually, investors expect a higher return when investing for longer periods.
Luca Paolini, chief strategist at fund manager Pictet Asset Management, says historically an inverted or flattening yield curve is a reliable predictor of recessions and bear markets. “In the US, each of the last seven slumps has been preceded by an inversion of the curve," he says. "There's no reason to believe this time will be any different.”
The yield curve shows the difference between the economy's current growth rate, and its long-term potential. "A flattening or inverted curve implies the economy is closer to hitting its speed limit, at which point it will quickly begin to decelerate.”
Mr Paolini points to August 13 when the gap between two and 10-year yields had narrowed to just 30 basis points.
By August 27 it had shrunk to just 18 basis points, as a two-year US Treasury yielded 2.67 per cent against 2.85 per cent on a 10-year bond.
“Given how far yields on long-term bonds have fallen relative to those on shorter maturity debt, the global economy is entering the last phase of its expansion that began back in 2009," Mr Paolini adds.
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Risk of escalating emerging market pressure looms
Asian stocks hit as emerging market woes spread from currencies
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Turkey's troubles
A storm has been brewing in Turkey for some years, but it really whipped up in August, as the Turkish lira plunged and US President Donald Trump imposed tariffs and sanctions amid a row over the arrest of an American pastor on terrorism charges.
Turkish President Recep Tayyip Erdogan made a bad situation worse by appointing his son-in-law as finance minister and irrationally claiming that high interest rates cause inflation, when economists traditionally see them as the antidote.
The collapse of the lira threatens contagion across emerging stock and bond markets, and possibly developed markets too.
Miles Eakers, chief market analyst at foreign exchange specialists Centtrip, warns that emerging markets are facing a crisis. “Unless action is taken, like a house of cards, they could all fall together.”
He says the Argentinian central bank has now raised interest rates up to 60 per cent, with the peso falling sharply, alongside the lira and South African rand. "Monetary policy tightening by the US Federal Reserve is squeezing the global flow of dollars which in turn is putting pressure on emerging market currencies," says Mr Eakers.
The contagion is spreading, he adds: “I fear this is just the beginning of an emerging market funding crisis and a continued devaluing of their currencies.”
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Argentina hikes interest rate to one of the world's highest amid falling peso
Investors ask again what can ECB do to save euro from Italian crisis
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Italy's vulnerability
Alternatively, the crisis could blow up in Italy instead, amid growing fears that the country could quit the European single currency, almost 20 years after it was launched on January 1 1999.
Italy’s national income has grown in real terms by just 3 per cent since 2000, against 24 per cent in Germany, according to Eurostat.
The country’s debts now total a whopping 132 per cent of GDP with crisis only averted by the European Central Bank's quantitative easing splurge which has seen it buy billions of euros worth of eurozone bonds.
The ECB is now scaling back its purchases, leaving Italy vulnerable and with other buyers in short supply this could make it hard to roll over debt.
The country is now ruled by an anti-establishment coalition of the Lega and Five-Star movement, who have denounced euro membership while falling short of calling a referendum on “Italexit”.
Kathleen Brooks, research director at trading platform Capital Index, says markets cannot discount the possibility that the new Italian government may choose to submit a budget that flouts EU rules. “This potentially puts them on a collision course with Germany, and towards a EU referendum. The euro could find itself under pressure for some time," she says.
Jordan Hiscott, chief trader at spread betting platform Ayondo Markets, says Italy is a core EU member and any exit would ultimately make the whole project look like an abject failure.
Mr Hiscott sees a 15 per cent chance of this happening at the moment. “When Britain leaves its various contributions will be missed. Should Italy follow the same path, I doubt the EU could exist in the same fashion.”
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Looming US political risks pose a real threat to the markets
Currencies under the spotlight amid trade woes
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The trade war
Donald Trump has made it his mission to shake up the world, hoping the pieces will fall in favour of the US, and stirring up trade wars is one of his favoured weapons.
So far he has threatened China, North Amerian Free Trade Agreement members Mexico and Canada and the EU, and is now talking of pulling out of the World Trade Organisation (WTO).
Joshua Mahony, market analyst at online trading platform IG, which recently opened offices in Dubai, says traders are constantly on the alert for yet more threats from Trump and this is driving risk aversion. “Trump’s insistence that he could leave the WTO hasn’t helped market confidence, with the potential imposition of tariffs on $200 billion worth of Chinese exports helping to raise market anxiety.”
Sam Instone, chief executive of wealth managers AES Investments in Dubai, says there are always plenty of threats out there, and you cannot run for cover every time. “Rather than reacting to every worry, or sell up in panic, keep your cool and focus on the long-term,” he says.
However, the global economy cannot keep dodging bullets forever and you might want to keep your head down for a while.
