Newsmaker: Mario Draghi, European Central Bank President
As 2015 comes to a close, the European Central Bank president is again faced with the task of trying to keep the European economy on track by pulling at monetary levers.
Next year, traders may well be counting on him doing the same for global financial markets if a rise in political tension and international violence proves long-lasting.
In recent times, investors shrugged off such flare-ups in large part because the US Federal Reserve was doling out liquidity through near-zero interest rates and bond-buying.
Now, with the Fed ready to start raising its benchmark rate for the first time in nine years, some are worried markets will no longer be inoculated from geopolitics.
"We've had geopolitical risk reaching a post-Berlin Wall high and yet that's had very little impact on markets," Tina Fordham, Citigroup's chief global political analyst, said. "The question is whether the Fed's tightening means less liquidity and so these risks start to register."
If they do, then Fordham said 2016 will see politics supersede economic challenges such as China's slowdown as the key driver of risk in markets. Next year will also see a US presidential election and likely referendum on the UK's membership of the European Union among other plebiscites.
A Bank of America survey of fund managers this month found 18pc citing geopolitics as the biggest "tail risk", trailing the 38pc who citied a Chinese recession and the 23pc who fear an emerging market debt crisis. The European Commission said on Thursday that "geopolitical tensions have intensified and the global economic outlook is becoming more challenging."
Whether investors do tune in more may ultimately depend on whether the extra monetary stimulus from Mario Draghi is enough to numb the markets against such a threat as the Fed withdraws. The Fed's balance sheet is now at about 25pc of US gross domestic product, while Draghi's is currently at about 20pc but set to increase at a fast rate if he boosts his asset-purchase next month.
Deutsche Bank strategist Marcos Arana is relaxed, noting global monetary policy will remain ultra-loose even with higher US rates and that there are always geopolitical tensions somewhere in the world. Terrorist attacks have also historically failed to roil economies.
"Markets are very focused on the Fed, on the ECB," he said. "It may feel that the geopolitical risks are higher, but the market isn't reacting to them and that will remain the case unless big geopolitical risks materialise." (Bloomberg)