Political risk will be a major investment theme this year, with several elections happening in Europe, but are stock markets pricing in more risk than is necessary?
There are several sources of political risk that may be worrying investors. President-elect Donald Trump's policies will be put to the test when he enters office later this month; several elections taking place across Europe this year where Eurosceptic parties could make gains, such as Marine le Pen's National Front party in France; and the U.K. will begin Brexit negotiations with the European Union.
Kamal Sharma, director & G10 FX strategist at BofA Merrill Lynch Global Research, warned that investors are concerned about Europe and issues such as Brexit.
"Political risk premium is a key story that dominates what investors are looking at, at the moment," he told CNBC's Squawk Box.