Omnipresent political risk
"A number of political risks threaten, including the risk of Brexit following the UK’s E.U. referendum on 23 June," writes Citi.
The pound has been buffeted by the upcoming Brexit vote, although the currency has staged a swift recovery in recent weeks as the "Remain" camp picked up more support:
The outcome of the referendum, and the U.K.'s economic performance in its aftermath, has the potential to radically change the start date for any tightening phase embarked upon by the Bank of England. And if voters in the U.K. elect to leave the European Union, it would also cause considerable headaches for continental banks.
The world's economic engine is sputtering
"U.S. activity remains surprisingly weak," the economists note.
The U.S.'s growth rate in the first three months of the year was a paltry 0.5 percent quarter-over-quarter, at an annualized rate. While concerns about skewed seasonal adjustments linger, this print underscored the notion that even at a seven-year remove from the financial crisis, the U.S.'s expansion has yet to really kick into high gear.
Economists have steadily been coming around to this way of thinking. Over the past eight months, they've trimmed their expectations for growth in the U.S. economy this year further and further, from a peak of 2.8 percent to 2 percent at present:
That's something you can't blame on residual seasonality alone.
Policymakers lack ammunition—or the willingness to use it
Central banks rates are low, and government debt is high.
"Policy space to respond to a potential downturn remains limited almost everywhere," writes Citi's team.
If a negative economic shock were to hit, the scope for central bank stimulus might be constrained: