In the London-based hedge fund’s Looking to 2015 report, Mr Hintze said the US is currently in the midst of a “highly technical market” that will be “punctuated by increasingly deep potholes”.
The ‘potholes’ will be exacerbated by limited inventories at bank desks (particularly when it comes to credit) resulting from regulations such as the Dodd/Frank Volker Rule and Basel III, he said.
“My concern is about the contagion risk of a geopolitically significant event,” Mr Hintze said.
For such an event to have a material effect on markets, there needs to be a “transmission mechanism” into the financial system, he said.
“I continue to be concerned about the potential fallout in response to a worsening of international relations between Russia and Europe and the US,” Mr Hintze said.
The effects of quantitative easing may well have muted the markets’ reaction to the situation thus far, he said.
The situation in Russia is one that CQS will monitor carefully going throughout 2015, Mr Hintze added.
But there are “numerous sources” of potential instability besides Russia, he explained.
Mr Hintze cited a slowdown in Chinese economic growth (as well as concerns about the country’s shadow banking system) as well as the Islamic State.
On top of those, he listed two other events to watch closely: the implications of a persistently low oil price, and renewed concerns about the sustainability of the Eurozone.
