Serious headwinds still remain a challenge

Highest on the agenda is the situation in Syria and the possibility of any potential military action by the UN or the US and its allies.

Frances Hudson, investment director and global thematic strategist at Standard Life Investments, says that, while the Middle East situation has seen the oil price spike and the gold price firm up as the commodity is the preferred safe haven in that region, there are wider implications.

“The other moving parts are whether president Obama gets congressional support for military action and that’s not clear yet. They’re not renowned for making speedy decisions. They’ve also got the debt ceiling to negotiate again, so the fiscal issues in the US have not gone away – they’re just taking slightly more of a backseat.”

Potential tapering of quantitative easing by the US Federal Reserve is another headwind facing the global economy – too much too soon could see economic improvements regress.

Ms Hudson notes: “With tapering they’ve got $85bn (£54.1bn), so they could reduce it slightly as a token, or they could reduce it more. The bond market is discounting $10bn as a median estimate starting this month, but in light of Syria discussions, that might not happen. The economic data is mixed so there isn’t an overwhelming push from that direction to do anything.”

Meanwhile in Europe, the forthcoming German election could provide another potential wobble, depending on the result. Ms Hudson suggests in terms of the “known unknowns”, the election seems to be progressing relatively smoothly with virtually everyone expecting Angela Merkel to be re-elected.

But she adds: “If they don’t cross the 50 per cent hurdle, she might be forced to look for a grand coalition which would have policy ramifications, that’s where the uncertainty comes in.”

Gary Potter, co-head of multi-manager at F&C, notes: “Clearly, Ms Merkel seems to be the strongest of the coalition members and probably will get back in, but I think once we get past that hurdle, there will again be the need for the ECB to make sure European banks are well capitalised.”

He also says the transition in emerging markets from an export-led economy to a consumer-driven one is not one that happens overnight and there are concerns on slowing growth. But he adds: “Those [countries] ultimately will start to improve again, and that along with the stimulus in Japan, all the improving economic signs in the UK and Europe and the US, means in 2014 we could actually see a synchronised global upturn in economic outlook. As long as interest rates are held reasonably stable that augurs well for risk assets.”

Nyree Stewart is deputy features editor at Investment Adviser