The continuing fiscal "fiasco" in Washington will be the key concern for investors going in to 2014, according to Alastair Newton, senior political analyst at Nomura investment bank.
Markets might have been relatively sanguine during October's partial Government shutdown, but Newton believes this muted reaction to the fierce political battle could encourage right-wing politicians to push the limits a little further.
"Fiscal uncertainty looks set to run into (the first quarter of 2014), which could delay tapering to (the second quarter of 2014)," he said in a research note released Monday.
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A compromise signed by President Barack Obama in October extended the debt ceiling until February 7 and reopened the government by approving funding until January 15. That means the country could be brought to another budget crisis in a few months.
Furloughed workers went back to work after more than two weeks out and the deal also released the government from a crisis that began with demands from House Republicans aimed at "defunding" the administration's health care law, President Barack Obama's signature domestic program, which began enrolling uninsured Americans on October 1.
Newton said that a non-binding agreement to be addressed by the House and the Senate in early January does look possible, which could annul the January 15 budget deadline. This could potentially avoid another government shutdown, but he added that the deal could resolve spending concerns but could just leave issues surrounding the debt ceiling up in the air.
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