Let’s take a quick look at Brexit-related news this week. Think in terms of contagion. We are at the beginning of the Brexit-related issues and not the end. My personal view is that the single largest systemic risk we face is a sovereign debt crisis stemming from Europe. But it could come from China or Japan or the EM. Debt is the common denominator. The globe is facing a long-term debt deleveraging cycle few of us alive have witnessed.
The debt problems are above the 90% debt-to-GDP level in most of the developed world. We’ll get through this somehow, but as Yoda might say, “think differently we must.”