The traditional year-end crystal ball exercise, consisting of listing outlooks and convictions for the next 12 months, often resembles the art of divination – offering conclusions that usually become obsolete after just a few weeks, as soon as the unexpected rears its head again…

This seems particularly true today after a year rich in uncertainties and a rather chaotic November. We prefer to focus on identifying major underlying risks and the market signals associated with them, in an attempt to gain clearer insight.

The challenges are numerous, and we cannot address them all here. As a starting point: the main stock indices are at, or flirting with, their all-time highs. This can certainly be explained by favourable economic fundamentals (global growth has clearly surprised on the upside this year compared to most forecasts) and very accommodative financial conditions. However, the underlying drivers are increasingly questionable, with excessive use of fiscal and monetary levers under the growing political influence of populist leaders.