Global Risk Briefing

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Indicators

Reserves Stockpiles

This shows total foreign reserves (excluding gold) held by each country’s central bank as a percentage of gross domestic product. They effectively act as a cushion against economic shocks, such as hyperinflation and currency depreciation, that could be triggered by external or internal events.

Unemployment

Figures are 2017 estimates by the International Labour Organization for those in the labor force aged 15+. Unemployment can serve as a proxy for the overall health of the economy. Long-term high unemployment levels eventually lead to less spending power among consumers, lower tax revenues for governments and possible social unrest.

Inflation

When prices are rising too quickly, the resulting confusion can lead to lower investment due to uncertainty about future costs and profits. Poor economic policies can spark or exacerbate inflation, as can a weakening currency.

Currency Volatility

Figure is for 3-month at-the-money implied volatility of the currency’s USD exchange rate. Currency options represent the market’s overall expectation of a currency’s future volatility. Significant movement in a currency’s exchange rate can bolster or weaken returns, depending on the type of investment. Figure for United States is for implied volatility of the USD-EUR exchange rate.

Source: Bloomberg, IMF and ILO

Credits: James Crombie, Jeremy Scott Diamond, Dean Halford, Brittany Harris, Flavia Krause-Jackson, Alex McIntyre and Mira Rojanasakul

Go to Bloomberg to read more.

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