As we enter the final month of the year most of us can look back on 2014 and say it has worked out better than we had expected in January. Back then we were worried about the sluggish economy, the narrowness of a market relying mostly on the performance of technology and biotechnology, the various pockets of political instability and conflict around the world and the ineffectiveness of our political process. In spite of all that investors were optimistic and the Standard & Poor’s 500 made grudging gains through the summer. That came to a temporary end in September and October when the index retreated back almost to its January starting point, but here we are with Christmas approaching and the year-to-date gain is 14 per cent.

There have been some surprises along the way. I don’t know anyone who thought that global oil prices would sink this low. Even though the major economies of the world were slowing, most expected demand from the emerging markets to keep oil prices around beginning-of-the-year levels and there was the possibility of reduced production from the Middle East as a result of unsettled conditions there. One development that has been celebrated in the United States has been the move towards energy independence in North America and reduced reliance on imports from Saudi Arabia and elsewhere. Much of the increase in US production is a result of hydraulic fracking, which is a relatively expensive process. As the worldwide price of oil has dropped, some capital spending projects to increase fracking production have been put in abeyance and there is a risk that current output could be reduced because of declining profitability.

A drop in interest rates was also unexpected by most observers, not only in the United States (1.86 per cent on the 10-year Treasury at October 15th), but also in Europe, where the German ten-year yield went below 1 per cent and other sovereign bonds, like those of France, Spain and Italy, traded at yields that would have been considered highly unlikely two years ago. Many commentators were sceptical of China’s claim that it was growing at a better than 7 per cent rate, but few thought that the Shanghai composite (A-shares) would be up 27 per cent this year, outperforming every developed country market. While the Japanese Nikkei rose, the yen declined sharply, which should have helped Japanese exports, but the economy still slipped back into recession in the third quarter in spite of an unprecedented amount of fiscal and monetary stimulus.

The strength of the dollar was also unexpected (1.23 against the euro at November 7th). After a weak first quarter the US economy picked up momentum, growing almost 4 per cent in the third quarter, faster than any other major economy except China. That helped the currency, but the improvement in the budget deficit and the safety of investments in the US drew capital from all over the world. Looking ahead, there is reason to think that the present favourable trends in the United States will continue. Initial unemployment claims have been generally declining and the unemployment rate continues to move lower. Consumer confidence is rising and retailers are hiring aggressively in anticipation of a strong Christmas selling season, fuelled partly by lower gasoline prices. The level of inflation remains low, which should help consumer spending. Next year the factors to watch are household formations and housing as well as capital spending. Recent data showing higher paychecks for younger workers should help the former and improved small-business confidence should help the latter.

On the list of worries should be the possibility of Europe falling back into recession as a result of the slowdown in Germany, partly caused by reduced demand from Russia. Hopefully Mario Draghi and the European Central Bank will become more accommodative and provide the funds necessary to keep Europe on the modest growth path. Japan will also need a new round of stimulus to keep out of recession. China will require some credit expansion to stay on its desired growth path, but the recent interest rate cuts show the authorities are sensitive to the challenges facing them. China is still not rebalancing the economy toward the consumer sector, which is a necessary step toward continued growth.

But as has been the case recently, The major uncertainties at this time seem more geopolitical than economic. The conflict between Russia and Ukraine remains unresolved even though a partial ceasefire is in place. The situation in Gaza continues to be tenuous. There is no definitive agreement yet with Iran on its nuclear weapons development effort and, as expected, the November 24th deadline has been deferred. And The conflict among China, Japan and others over the South China Sea would appear to have quieted down for a while. Any of these could erupt into a condition that would destabilise both the world economies and the financial markets, but the one that worries me most continues to be the Syria/Daesh/Iraq conflict, where it remains unclear whether Daesh can be stopped or turned back with Syria and Iraq fighting them alone.

— Byron Wien is the vice chairman of Blackstone Advisory Partners LP