In its latest research the bank says that despite staging a moderate recovery in the second quarter of this year the global economy ‘remains dogged by downside risks.’
The escalating conflict in Ukraine has the potential to cause significant trouble for the global economy, as does Israel-Palestine conflict and the emergence of the Islamic State across Iraq and Syria.
BAML said concerns about financial instability in China are growing as well, as a potential bond default case looms there.
The list has not yet hit markets too hard however with BAML noting that global economic activity data has been striking an ambiguous ‘positive but caged tone.’
The latest industrial production prints came in stronger in China but disappointed in the US and Europe for example, while housing starts fell in the US just as core retail sales picked.
BAML said there is a silver lining to this particular cloud in the form of more evenly balanced risks around GDP growth in 2015 due to recent downward revisions forecasts.
