Forget Ukraine and Israeli investors won't see these risks coming in 2024

What pessimists fail to see is that high-profile global events are already priced in by markets – Jason Alden/Bloomberg News

Ken Fisher founded Fisher Investments and built a fortune estimated at $6.3 billion. He writes a monthly column for Telegraph Money

Surprises have the most influence on actions, whether positive or negative.

My forecast for 2024 suggested that pessimists, obsessed with issues such as the cost of living and the wars in Ukraine, Israel and Gaza, would be shocked by double-digit gains in a bull market. So far so good, with global markets up 9.9% in recent months.

What these pessimists fail to understand, however, is that high-profile global events are already priced in by markets.

The biggest threats to markets are economically significant events that have befallen us without our realizing it. Sometimes this is because high sentiment encourages most investors to overlook the elephants in the room. Sometimes there are real shocks.

There are several potential surprises that I am watching for later in 2024 and 2025.

While Ukraine and the Middle East are enormous human tragedies, neither is of great economic importance and is already well known to the markets. Likewise, tensions between Taiwan and China are no higher today than in the past.

But the risks linked to the China-India-Pakistan armed nuclear triangle remain unnoticed by most investors. Historic border skirmishes, conflicting religions and cultures (a duo that can often create tension), and competing economies and politics keep tensions alive.

Pakistan saw its GDP plunge last year, while inflation soared 30% and public debt soared. There is also a lot of political uncertainty surrounding incarcerated former Prime Minister Imran Khan, with his pending conviction appeal potentially further destabilizing Pakistan.

In China, President Xi's increasingly relentless new economic restrictions mean the country's miraculous growth is over. Meanwhile, India stews with envy as China favors its regional neighbor Pakistan. China views initiatives such as India's strengthening of Himalayan infrastructure as an encroachment on disputed land.

The story continues

The chances of war are not high, but they are not small either. And it could involve the world's two most populous states and its second and fifth largest economies.

Risks from growing tensions along the India-China border remain unnoticed by most investors – Money Sharma/AFP

Although cryptocurrencies themselves are too small to impact the economy as a whole, issues with the details could affect non-crypto assets.

Two high-profile cryptocurrency bosses have come under investigation, with prison time for FTX's Sam Bankman-Fried and charges against Binance's CEO. And changes to Bitcoin rules in the US and EU will likely lead to more rules. Even well-intentioned rules can have unintended consequences.

An overly punitive approach to AI could also hinder innovation and growth. The UK and EU approaches seem manageable in principle, but the G7 plan could yet yield explosive results.

Another potential surprise hidden in plain sight: politics. This year is the biggest election year in history, but I'm not talking about counting votes, I'm talking about legislating.

With the Congress of the Americas deadlocked, I don't expect many economically significant bills to pass this year, but newly elected presidents are still trying to pass laws signed early in their terms before their popularity does not fade. Markets are much more variable early than later in a president's life.

A victory for former President Donald Trump, slightly ahead in the polls at the moment, could get investors excited about tax cuts or deregulation. But it could be disappointing if these measures do not materialize.

With no election date scheduled in Britain, it is too early to ask what the legislative agenda might hold for investors on this side of the Atlantic.

I remain optimistic for 2024. But risks still 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.

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Rest assured, the bull market will last another year (at least)

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