Diverging central bank policies and political risk in Europe will lead to increased volatility in equities, fixed income and currencies.
U.S. equity market returns are likely to be more modest in 2015 thanks to full valuations and rising interest rates.
International equity markets will benefit from expansionary monetary policy and weakening currencies, though U.S. investors need to be mindful of currency risk.
Market interest rates are set to rise once the Fed makes its first move, but the increase is likely to be capped by the relative attractiveness of US rates, low inflation, and more demand than supply for investment-grade assets.
Higher yield, but higher risk parts of the bond market, such as emerging market debt and high yield, offer the best cushion against interest rate hikes, as defaults (ex-Energy) are likely to remain low, but selectivity is key