Scenario planning, through the lens of The Art of Markets, is not just about imagining different futures, it is about mapping how pressure builds, transfers, and ultimately releases across the financial system.
Rather than static ‘optimistic, base, and pessimistic’ cases, this framework reframes scenarios as dynamic states of alignment and imbalance between key market forces: price, positioning, liquidity, risk, and sentiment.
In this context, scenario planning becomes a process of asking where is pressure building? (e.g. crowded trades, elevated leverage, policy constraints). What could trigger its release? (e.g. rate shocks, geopolitical events, liquidity withdrawal) and how will that release propagate across markets?
