As commodities stabilize, inflation will also probably return to more normal levels. However, wage inflation specifically is unlikely to spiral. Central banks also care about avoiding deflation. Partly as a result, authorities are not compelled to raise rates aggressively while wage inflation is low. Furthermore, two major developed world central banks, the European Central Bank and the Bank of Japan, remain in easing mode. Overall, monetary policy makers are unlikely to spoil the outlook for risky assets in 2016.
The final question is whether political noise will significantly disrupt markets in 2016. Here again the answer is encouraging. Although terrorism appears to be on the rise, with all its terrible human implications, major economies have historically shown remarkable resilience in the face of terrorist threats. In the U.S., although the presidential election campaigns have thrown up some extreme rhetoric, centrists are still likely to prevail in the final contest next year. Finally, in emerging markets, Argentina's shift away from populism is a sign that economic hardship can propel voters towards pro-market policies.