Risk should be viewed in two ways: as the possibility of loss, but also as the possibility of missing out on gains. It is therefore essential to consider not just what can go wrong, but also what can go right.

Tej Parikh outlines five positive scenarios for the global economy in the Financial Times:

1. Trump dilutes his tariff plans. Although the market has recently viewed Trump as adopting a hard stance on tariffs, the latest reports suggest that the reciprocal tariffs set to take effect on 2 April may be more limited and flexible than initially expected.

2. European economy surprises on the upside. Increased spending on defence and infrastructure, or a ceasefire in Ukraine, could strengthen business and consumer confidence.

3. The Chinese economy accelerates. Government stimulus measures could enhance consumer confidence, while China’s advancements in AI are expected to drive economic growth in the coming years.

4. US growth surprises positively. While much of the focus is on tariffs, Trump is also reducing regulations and taxes. The US remains a leader in AI, and private sector balance sheets remain strong.

5. Lower interest rates. Wage growth around the world is slowing, which could give central banks room to cut interest rates, potentially revitalising interest rate-sensitive sectors of the economy.

It is unlikely all of these positive scenarios will come to pass. The US market may rebound in the short run, but the upside will be constrained by high valuations and the Trump administration’s focus on reducing the US budget deficit. I remain more optimistic about European stocks.

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