Despite monetary policy action by the European Central Bank (ECB), appetite for risk has diminished and investors are starting to look cautious, according to industry experts.
Last week, the ECB announced an extensive stimulus package which included extending its monthly asset purchases and cutting its deposit rate to -0.4 percent.
But, Michael Harris, managing director at Renaissance Capital, questioned whether the package would provide support for European markets to move higher.
"You need to see signs that this is actually working, that yes, the backdrop of such extremely low rates is filtering through to some animal spirits," he told CNBC on Tuesday.
"Right now, there is enough caution in the animal spirits that we can't take anything for granted."
Part of this caution, he explained, was related to fears that central banks around the world had the capacity to successfully guide markets.
"For a long time there wasn't much of a debate. The U.S. was recovering, rate hikes were coming, so it was easy to be in the (S&P 500)," he added." Now there's a serious debate about, OK, do central banks have enough fire power?"
European stock markets fell 1.42 percent on the day of the ECB announcement. Since then, the Euro Stoxx index has rallied 2.58 percent.
Meanwhile, a poll of financial advisors in the U.K. published this week found clients' risk appetite had dropped. More than half (52 percent) said their clients appetite for risk had decreased over the last 12 months, while 8 percent said the drop had been dramatic.
The online survey of 101 advisers, commissioned by investment platform Rplan, also found that 29 percent of the advisers expected the number of people in the U.K. investing in the stock market would fall this year.
"No doubt the volatility in January and 'Brexit' vote later this year are factors in making investors more cautious this year, although there are other issues around the world that need to be considered," said Stuart Dyer, Rplan's CIO, in a press release.
"But investing has never been easy and there have always been risks facing investors."