Financial markets have staged a remarkable recovery since the fall of Lehman Brothers, but it's been a joyless affair,” says Vice Chairman Edward Bonham Carter. “The ending of central bank support, both feared and wanted, hangs like a sword of Damocles over the market.”

Trade volumes, trade agreements, and tariffs have been the focus of capital markets over the last year. Capital markets have taken the existing unencumbered trade regime as a given, and priced in the continuation of the existing order of ever-expanding trade and lower tariffs that would benefit all parties involved.

People are drawing parallels with the Crimean annexation and sanctions put in place then - which heavily impacted the Russian market. But the macroeconomic Russian situation is very different today - it is much better...

Heavy scrutiny by supervisors has put the balance sheet clean-up plans of Italian banks under the spotlight; reducing NPEs has emerged as a key element of the banks' business plans. Intesa and UniCredit look well placed to achieve their targets by 2021.

With monetary tightening expected, investors will need to consider the sensitivity of their equity portfolio to sovereign bonds and protect it as far as possible through active stock selection and sector allocation.