Morgan Stanley's Global Economics team led by Joachim Fels has released its list of Macro Surprises for 2013.
"We pick up a tradition introduced nearly three decades ago at Morgan Stanley by our legendary former US strategist Byron Wien," wrote Fels.
Earlier, we scored Wien's surprises, which he now predicts for his new employer Blackstone.
"These surprises do NOT represent our base case," emphasizes Fels. "Rather, the events we describe would come as a surprise to us as well. However, we do believe that they depict plausible possible outcomes that would represent a meaningful surprise to the prevailing consensus."
Their list of surprises for the year ahead spans the globe and runs the gamut of potential monetary, fiscal, and geopolitical scenarios.
Just When You Thought it Was Dead, Inflation Returns
Inflation could be triggered by a combination of another drought which limits agricultural production, stronger-than-expected recoveries from world's economic powerhouses (China and the U.S.), and ballooning central bank balance sheets.
Source: Morgan Stanley
Debt Cancellation
The U.S., Japan, and U.K. announce that all debt resulting from their QE purchases is cancelled, which would assuage the fears of ratings agencies but anger bondholders.
Source: Morgan Stanley
US Over the Cliff and Likes it
Chief U.S. Economist Vincent Reinhart predicts a fiscal cliff deal gets pushed into 2013, but an ultimate compromise reinvigorates confidence. Business investment jumps and the job market improves.
Source: Morgan Stanley
See the rest of the story at Business Insider
Please follow Money Game on Twitter and Facebook.