What Could Go Wrong? 5 Black Swan Scenarios for 2024

BCA Research sketches out how such events could roil the markets—and the world.

A nuclear face-off between the U.S. and Russia, a Chinese recession, military skirmishes in Asia, a missile strike on the Strait of Gibraltar—and a woman as U.S. president. BCA Research has outlined this quintet of high-impact, low-probability events for this year, known in Wall Street parlance as “black swans.”

A Dutch explorer discovered these birds in 1697 in Australia, and the phrase has come to stand for unlikely occurrences. Scholar Nassim Nicholas Taleb applied it to finance in the wake of the 2008 to 2009 financial crisis.

This year, the impact of such events would be mostly hurtful to the stock market, in BCA’s estimate—as much as a 40% drop for the S&P 500 owing to a U.S.-Russia nuclear showdown, with 20% drops for three of the other four other scenarios. The exception: the election of a female president, which BCA reasoned would be positive for the market.

In the week after the September 11, 2001, terrorist attacks, the S&P 500 lost almost 14%. The black swan that directly affected the financial world—the collapse of Lehman Brothers in September 2008 and the ensuing economic downturn—featured a 57% decline until hitting bottom the following March.

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Four of the five BCA scenarios “would depress animal spirits,” driving down even a promising stock market, says Matt Gertken, chief geopolitical strategist at the firm. The probability of these five happenstances is small, yet they are hardly beyond possibility, he insists.

U.S.-Russia nuclear confrontation (10% chance of occurring ). Since the 1950s, the threat of a nuclear clash between Washington and Moscow has festered. While Russia’s economic heft and military might have diminished since the days of the Soviet Union, the nation still has a potent arsenal of nuclear weapons. The Russian invasion of Ukraine has bogged down in a stalemate, but “the strategic conflict between the U.S. and Russia is alive and dangerous,” the BCA report declared.

The BCA paper noted that, at the outset of the Ukraine war, Russia put its nuclear forces on high alert and stated it willingness to use nukes if its homeland were attacked. Russian President Vladimir Putin also has stationed nuclear warheads in Belarus, closer to Western Europe than Russia. Both Washington and Moscow could “rattle [their] nuclear sabers in 2024,” BCA wrote. The result “would be a level of nuclear brinkmanship not seen since the Cold War.”

Iran bombards the Strait of Gibraltar (30%). Tehran has the capacity to make nuclear weapons, and the ongoing violence between Israel and the Houthis (the militarized Shia Muslim group from Yemen) could lead to Iran blocking the Straits of Hormuz, choking off oil shipments from the Persian Gulf. Any such disruptions could push Israel into striking Iranian bomb-making facilities.

While Gibraltar is 3,600 miles away from Iran, the mullahs could then up the ante by hitting this chokepoint for the Mediterranean Sea, BCA warned. An Iranian general already has posed that very threat. Iran showed it could and would attack far from its home turf, striking a Japanese chemical tanker off the Indian coast in December 2023. Gertken hypothesizes that a Gibraltar missile attack would be launched from the North African desert.

Recession in China (60%). The Chinese have worrisome problems with high corporate and real estate debt, and China’s vital importing machine has stuttered, with a 5.5% decline last year. Beijing has demonstrated in the past that it will expand government spending to offset economic weaknesses. Still, the debt is owed by many small businesses and homeowners, and it may be too big for fiscal policy to counteract.

Military strife in Asia (50%). The most dangerous flash point there is North Korea, which has stepped up its rhetoric about marching into South Korea and reuniting the two under the North’s dictator, Kim Jong Un. BCA cited two North Korean experts who claim Kim is “literally preparing a 1950-style attack on the South.” The U.S. is treaty-bound to protect the South and has troops stationed there.

Further, China could “put pressure” on its neighbors, such as Taiwan, Vietnam and the Philippines, BCA wrote. Beijing has stepped up its talk about reclaiming Taiwan, and there have been incidents on the sea and in the air in which Chinese warcraft have menaced the others’ commercial shipments.

Add to all that the ongoing enmity between India and Pakistan, both nuclear powers. The two nations clashed at their border in 2019, and now conduct raids in each other’s territory against Hindu (Indian) and Islamic (Pakistani) militant groups.

Woman president (10%). For the market, this would be glad tidings indeed. Members of both political parties are in favor of a female president. Right now, certainly, it looks as if Joe Biden and Donald Trump will be their parties’ standard bearers. Should Biden step aside for any reason, Vice President Kamala Harris would replace him and, despite her low poll ratings, would have the advantage of incumbency.

Michelle Obama, a Democrat, has the highest favorability rating of any woman mentioned for the Oval Office, though she has displayed no hint of political ambitions. Republican Nikki Haley, the former United Nations ambassador, is still running against Trump, but she is far behind in the polls. If Trump somehow were to end his campaign, the report argued that Haley would be a strong favorite at the Republican National Convention.

In BCA’s view, “the political logic for a woman president is clear for 2028—but black swans could make it happen in 2024.”

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