Markets do not have the best of past records in pricing in major systemic risks to the global economy that later materialized and that then caused substantial market declines. Judging by how sanguine markets currently seem to be about the unusual constellation of major risks facing the world economy, we could very well be on the cusp of another episode on which we will look back and ask ourselves, "What were the markets thinking?"
Niall Ferguson, the noted historian, provides us with a vivid past example of global financial markets failing to price a major