Top of mind this summer, more so than any other recent summer, is the extent to which the recent remarkable streak of performance across almost all asset classes powers ahead, or loses momentum.

As we enter 2026, markets are tinder-dry with risk, and for now the winds are calm. Since last month, global markets have seemingly settled into a tranquil yet uneasy holding pattern, having made considerable progress to date in navigating the turbulence presented by tariffs, policy uncertainty, geopolitical travails, and stagflation.

What might occur in the year ahead to potentially ignite a spark − could it be another policy surprise from the U.S. Administration, geopolitical tensions, or macroeconomic developments?

Let's map out and break down the key risks that might cast a long shadow over current pricing in global markets.

In the U.S., markets appear to be much less responsive than usual to surprises in economic data after the U.S. Federal Government shutdown late last year. This stands to reason − the U.S. Administration has challenged the independence of not only the U.S. Federal Reserve, but ostensibly also the civil servants at the Bureau of Labor Statistics and the Bureau of Economic Activity who produce the data releases. Some believe, and there is very little evidence that contradicts their view, that President Trump intends to do what he sees as necessary to frame the macro outlook and asset price dynamics in the best possible light for the Grand Old Party ahead of this year’s midterm elections.

In China, authorities have held back on announcing significant fiscal stimulus, instead preferring to outmaneuver the U.S. on trade and foreign policy, particularly with respect to rare earths supply. All the while President Xi has tirelessly advanced China’s economic and strategic interests, most recently allowing the renminbi to reach its strongest level against the U.S. dollar in the past several years, and applying ever-increasing pressure on Taiwan's independence (given its semiconductor fabrication infrastructure after the U.S. set a dangerous precedent in Venezuela, which has the world’s largest oil reserves).

In Japan, Prime Minister Sanae Takaichi has just called snap elections in an effort to shore up support for planned fiscal stimulus and policy support intended to ease the cost of living. However, she must also contend with a lack of macro policy coordination with yen weakness; a reticence from the Bank of Japan to continue tightening policy and preserve its "virtuous cycle" between activity, wages and prices; and ceaselessly rising Japanese government bond yields. This is a potent combination that also indirectly led to the downfall of the Prime Minister’s predecessor, Shigeru Ishiba.

And these thematic patterns are repeated in kind throughout Europe, Canada and the UK: unsteady political leadership, complex macro and broader policy challenges, and the fragmentation of the regional and international order via superficial cooperation amid divergent national interests.

All the while, risk assets are priced for continuing material gains, and valuations are stretched to record levels, whilst central banks globally are making marginal adjustments to gradually recalibrate policy towards the elusive, ever-shifting mirage of neutrality − loosening here, tightening there − all second order given the macro backdrop described above.

When could valuations adjust and risk potentially be adjusted or even repriced? It is the critical question we are all focused on this year in global markets. Pricing may well continue its onward march higher this year, but after a period of such impressive asset market performance, history would suggest the largest gains are behind us.

Coupled with the possibility of complacency amongst market participants who have become accustomed to outsized gains in recent times, this sets the stage for an interesting and eventful year ahead and does create opportunities for those prepared to question the current consensus that underpins market pricing.