All the risks that investors won’t see coming in 2024

Surprises have the most sway on stocks – both the positive and negative ones. My 2024 forecast suggested that pessimists, fixated on issues like the cost of living crisis and wars in Ukraine and Gaza, would be shocked by double- digit bull market gains. So far, so good, with world markets soaring 9.9pc in the past few months.

The thing those pessimists missed is that markets price in high- profile global issues which are already well known.

The biggest threats to markets are economically significant events which have crept upon us broadly unseen. Sometimes this is because lofty sentiment encourages most investors to overlook elephants in the room. Sometimes there are true shocks.

There are several potential surprises I am monitoring for later in 2024 and into 2025.

While Ukraine and the Middle East threaten huge human tragedies, neither are greatly economically significant and they are both already well-known to markets. Similarly. the tensions between Taiwan and China are no more elevated now than in the past.

But risks from the nuclear armed triangle of China, India and Pakistan still fly under most investors’ radar.

Historical border skirmishes, conflicting religions and cultures ( a duo which can often create tension) and competing economies and politics keep tensions simmering.

Pakistan saw its GDP plunge last year, while inflation soared 30pc and government debt ballooned. There is also plenty of political uncertainty around incarcerated former prime minister Imran Khan with his conviction appeal, which could further destabilise Pakistan, pending.

In China, President Xi Jinping’s increasingly endless new economic restrictions mean the country’s “miraculous” past growth is finished.

Meanwhile, India stews enviously as China favours its regional neighbour Pakistan. China sees initiatives like India’s boost to Himalayan infrastructure as infringing on disputed land.

The odds of war aren’t high, but they aren’t tiny, either.

And it could embroil the world’s two most populous states – and its second and fifth-largest economies.

While cryptocurrencies themselves are too small to hit the broader economy, devils in the details could affect non- crypto assets. Two high- profile crypto bosses have faced investigation, ‘Risks from the nuclear armed triangle of China, India and Pakistan still fly under investors’ radar’ with prison time for FTX founder Sam Bankman-Fried and charges against the chief executive of Binance.

And changes to rules for Bitcoin in the US and EU are likely to lead to more rulemaking.

Even well-intended rules can carry unintended consequences.

An excessively punitive approach to AI could also stymie innovation and growth. The UK and EU approaches seem manageable in principle, but the G7’s plan could still spark explosive outcomes.

One more potential surprise hidden in plain sight: politics. This year is the biggest year for elections in history, but I am not talking about vote- counting – I’m talking about lawmaking.

With America’s Congress gridlocked I don’t anticipate the passing of many economically significant bills this year, but newly-elected presidents always try to cram in signature laws early in their terms – before their popularity fades. Markets are much more variable early in presidents’ terms than late.

A victory for former president Donald Trump, who slightly leads in polls today, might get investors excited over tax cuts or deregulation. But this could tee up disappointment if those moves do not materialise.

With no election date on the cards in Britain, it’s too soon to sweat over what the legislative agenda may throw at investors on this side of the pond.

I still remain bullish for 2024. But risks always exist. I’ve done my best to imagine some of the potential surprises investors face – but the biggest risk of all? The one that no one saw coming.