When reviewing your risk profile you should always look at the PROBABILITY of economic or political events that may affect markets.
Brexit, No Deal, Global Economic Slowdown, Central Bank stimulus such as QE and Interest Rate Cuts, Military Intervention, Trade War - what is the probability of any event?
You should also assess the SCALE of the risk e.g. +/- 20% tolerance to losses means different things to different people.
Odds at the 'Bookies' as at 24/07/2019
Probability of Market Correction?
Shares Price/Earnings Ratio = Currently same as 1930's crash and higher than 1987 Black Monday, 2001 crash and 2008/9 Credit Crunch crisis.
Low stock market valuations combined with economic recession = correction (up to - 20% fall)
High stock market valuations combined with economic recession = bear market/crash (- 40% fall) – this is potentially where we may head with a No Deal Brexit.
However, Central Banks such as the Federal Reserve, the Bank of England and the European Central Bank are already making noises about economic stimulus to try and prevent slowdown, recession and ultimately prevent a market crash.
Brexit/Iran/North Korea/China/Trade War/Trump/Boris? Anything could tip the balance. The UK’s Office for Budget Responsibility in its July 2019 Fiscal Risks report certainly covered the major risk of recession and estimates an impact of over £30bn lower government revenue for 4-5 years in the event of a No Deal Brexit.