Economic commentators' recession indicators are starting to flash amber, on the back of growing fears about tightening global liquidity, the impact of US dollar strength and escalating trade tensions between the US and China.
Oxford Economics warned investors are right to be increasingly nervous as this long period of growth has given a false impression of stability, encouraged risk-taking and led policymakers to underplay risks.
Its latest research note argued the risks of a recession or big slowdown, perhaps in 2020, have grown. Possible danger areas include higher-than-expected inflation; an unfavourable policy mix of trade tensions and central banks raising rates faster than market expectations; or tightening global liquidity combined with US dollar strength.
Tighter liquidity was also highlighted by Cross Border Capital in a September research note, which noted liquidity "crashing" at its fastest rate since 2008 as the Federal Reserve continues to tighten monetary policy, while its World Central Bank Liquidity index (which ranges from 0-100) fell to its weakest reading since the early 1980s of 13.8.
The latest BofA Merrill Lynch Fund Manager Survey for September found 43% of respondents said a full-blown trade war was the biggest risk to markets, leading respondents to increase their cash exposures to an 18-month high of 5.1%.
However, it seems investors are being distracted by escalating trade war tensions, instead of also focusing on the increasing lack of liquidity across markets.
Global liquidity is only set to tighten as the Fed continues reducing its $4.5trn balance sheet, while the European Central Bank's bond-buying programme is set to finish at the end of 2018.
Furthermore, global debt levels rose to a record $247trn in Q1 this year, $29trn higher than the end of 2016, and the global government debt-to-GDP ratio now stands at 318%, according to The Institute of International Finance.
These warning signs have also been highlighted by market commentators, with Didier Saint-Georges, managing director at Carmignac, arguing a collision in monetary, business and political cycles will begin to cause "strange" occurrences.
He added: "The effect of Washington's monetary and trade policies is thus to hoover up liquidity, and with it economic growth elsewhere in the world."
These factors create an ominous backdrop for global markets and should provide investors with plenty of food for thought regarding their asset allocation decisions.
Cross Border Capital recommends cautious investors should look to increase their US dollar exposure as the Fed continues to raise rates, and move into mid-duration government bonds.
"Global equities appear to be in a topping phase and credit markets, which have absorbed huge borrowings of late, look vulnerable to us," it added.