With all that is going on in Saudi Arabia, it was understandable that those at last week’s Future Investment Initiative in Riyadh did not pay too much attention to global markets. They came to hear how the Kingdom’s economic policymakers would react to the repercussions of the death of Jamal Khashoggi, and were not minded to pay too much attention to the broader geo-financial background. But, to paraphrase a quote from Leon Trotsky, you may not be interested in financial markets, but financial markets are interested in you. Economic Minister Mohammed Al-Tuwaijri did make the point that the government’s privatization plans, including the big initial public offering (IPO) of Saudi Aramco, depended in the last resort on the state of the world’s markets. The Aramco IPO, now slated for 2021, is so far away that it’s hard to predict how global equity markets will look by then. Far more relevant is the current outlook, and this is a cause for some alarm. The month of October is the traditional time for market turbulence, and it did not disappoint. The most important equity index on the world, the S&P 500, fell sharply, wiping out all the gains of the year so far. It has been the worst month’s trading in US equities since the global financial crisis. American markets are fragile, and some experts believe it would only take one big shock to send them into freefall. The immediate concern is the technology sector, which has buoyed the market for years. Two tech stocks — Amazon and Alphabet (owner of Google) — passed the $1 trillion capitalization mark this year, but investors have obviously decided that is far enough. Both were among the biggest fallers last week. The Nasdaq market, on which many tech stocks are listed, lost a massive 11 percent in October. The big shadow looming over the US is the prospect of a serious escalation in the trade war with China and other countries. Frank Kane Aside from the tech sector, there are other worries in the US. President Trump’s transparent attempts to manipulate monetary policy by calling out the Federal Reserve’s independent right to set interest rates has damaged the US’ longstanding tradition of financial probity, even if the prospect of rising rates is another reason for market fragility. The quantitative easing party has to end sometime and it is not the president’s call when it is over. The big shadow looming over the US is the prospect of a serious escalation in the trade war with China and other countries. The US’ impressive economic growth rate — around 4 percent looks achievable for the year — depends greatly on the health of global trading, and all-out economic war between the two biggest economies would be a big hit to world markets. Above all this is the shadow of debt. The world has been on a borrowing binge since the global financial crisis. Public and private debts are four times what they were back then. The latest area for concern in the market for leveraged debt, so-called “fool’s money” that is borrowed by companies already in financial difficulties and then traded as bonds. Some believe this $1.3 trillion market will play the same role in the next financial crisis as “sub-prime” mortgages did in the last. Finally, the Congressional mid-term elections next week are a source of instability. A split Congress is a real possibility, which would obstruct executive efforts to deal with any potential crisis. Trump has proved himself to be a mercurial policymaker in times of economic stability and growth. Who knows how he would react to a crisis? Why does this matter to the Middle East and Saudi Arabia? The Kingdom is a big investor in the US, and Saudi policymakers are adamant that this will continue for the foreseeable future. Big investments in the technology industry (such as the Public Investment Fund’s stake in Uber), in energy (Motiva in Texas), in infrastructure (the Blackstone fund) and in real estate would all be at risk in a US market downturn, quite apart from the knock-on effect on the global oil price and the Kingdom’s revenues. This would come at a sensitive time for Saudi Arabia. Despite the uncertainties of the past few weeks, the investment scene has been rather healthy. The fall in the Tadawul that came on the news of Khashoggi’s death has been made up; it is now once more nudging the 8,000 level. That recovery could be endangered by an American market panic. All investors’ eyes should be on the S&P between now and the mid-term elections next week. Frank Kane is an award-winning business journalist based in Dubai. Twitter: @frankkanedubai Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News" point-of-view