Possible scenario
ECB Credibility Test
20% Chance
Markets test whether the ECB can credibly protect the euro area's second-largest sovereign borrower without creating legal or political backlash. This is less likely than containment, but the size of France's debt stock makes the tail risk unusually important.
Initial impacts
- Riskier companies' borrowing costs Up
- Market volatility Up
- 10-year Treasury yield Down
- US dollar Up
Secondary impacts
- Finance -1.4%
- Industrials -0.8%
- Utilities
Portfolio impact
S&P 500-1.1%
Each figure is the modeled move of the S&P 500 if the outcome occurs. For information only. Not investment advice.
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