There appears to be a perception in markets that once this week's key political events in the U.S. and China are over, uncertainty will be lifted and investors can get back to the 'risk on' trading environment that has prevailed in recent months. Don't bet on it, strategists say.
They point to factors such as impending U.S. spending cuts and tax hikes, referred to as the and nagging concerns about the euro zone debt crisis as reasons not to expect a swift move back into risky assets.
U.S. voters go the polls on Tuesday, while China's ruling Communist Party will unveil a new team of leaders to rule for the next decade during a congress that starts Thursday. Let's not forget central bank meetings this week that take place in the euro zone and Britain.
(Read More: China at a Turning Point as New Leadership Takes Over)
"I don't see a swift re-entry into risk assets because there are still lots of different catalysts (for uncertainty) – once the U.S. elections are over. We have the 'fiscal cliff' and after the 'fiscal cliff,' we still have Europe," Nick Maroutsis, Managing Director at fund manager Kapstream told CNBC.
"Ultimately investors are likely to remain cautious, they will dip their toes into the markets and focus on equities in the U.S., then Asia and Europe," he added.
Aggressive monetary stimulus from central banks, including the U.S. Federal Reserve, better economic data from the U.S. and China and efforts by European policy makers to end the debt crisis in the euro zone have all boosted investor sentiment in the past four months.
Against this backdrop, U.S. stock markets have rallied about 12 percent, while European and Asian markets have notched gains of 17 percent since early June.
Risk on, Risk Off; Which?
A clear outcome to the U.S. vote and the start of the political transition in China, which have been hanging over markets for months now, are expected to give sentiment a temporary boost. Which is a signal for investors to sell, analysts say.
"If there is a clear victory for (President Barack) Obama, then there's probably going to be 'risk on' for a couple of days, maybe a week," Ron Rennie, global head of currency strategy at Westpac Bank in Sydney told CNBC Asia's "Squawk Box".
"I still think you sell into this – because we would still have the status quo –a Democrat president, a House held by the Democrats, the Congress held by the Republicans, nothing gets done. So I like selling that strength on risk," he said, referring to the fiscal cliff.