A big market collapse and $20 oil make the list of Nomura’s ‘grey swan’ predictions for 2019

The mini market quakes in 2018 — the emerging markets currencies collapse, trade wars, Brexit and U.S. stock correction — could be precursors for a big one in 2019, Nomura said.

There are three possible market quakes, according to Nomura: a collapse in stock price, a contagious sovereign crisis in Europe and Chinese defaults. They cited U.S. stock valuations, Italian sovereign risk and China’s mountain of private debt as the catalysts.

“In such an environment, cash would likely be king, risk markets would underperform and safe-haven currencies such as the yen would do well,” the analysts wrote in the note.

“It’s easy to paint a picture of a market crisis in 2019, market liquidity conditions worsening with lingering effects of Fed hikes and continued balance reduction, the European Central Bank and Bank of Japan scaling back their quantitative easing measures and China continuing its deleveraging policies,” they added.