There is a risk of another recession next year, protectionism could cause major problems in 2011 and recent stock market strength could be curtailed, Roger Nightingale, strategist at Pointon York, told CNBC Monday.
"If the … world economic cycle is going to be turning down in the second half of 2011 and if in addition to that you get tight money, we could get a fairly steep downturn. We could have another recession," Nightingale said.
Many parts of the world are beginning to tighten liquidity in a bid to tackle inflation, Nightingale said after China raised its key interest rate over the weekend.
"That which has been fueling the rally is going to be withdrawn … the capacity for the market to rise will be diminished," he said.
The positive stock market momentum will likely remain for the first part of the year, but problems could become apparent as the year wears on, he added.
One of the key risks investors face in the new year is protectionism, according to Nightingale.
"If you get protectionism nearly everything goes wrong," he said.
When some countries are more competitive than others, "the temptation to go down the protectionist route is very high indeed," according to Nightingale.
When protectionism occurs, the best economies tend to suffer most, Nightingale said, adding that China could suffer protectionist measures at the hands of Western governments in Europe.