THERE are three key macro risks on the radar screen at the moment – a “hard landing” for the Chinese economy, fears of a eurozone break-up and the US “Fiscal Cliff”, (the combination of the ending of tax breaks and the simultaneous implementation of automatic spending cuts).

It looks as though the first of these risks has been taken on board by the markets and there has obviously been endless angst over Europe but, by and large, the US risks seem to have been ignored.

As an illustration, one only has to study the relative performances of equity markets. China this year has seen shares fall sharply in value and they now stand near the 2009 lows, whilst both the US and European markets have recovered from the depths of the global financial crisis.

Here, however, there is a marked difference in performance. Since the lows of 2009 the MSCI Europe has gained 65% whilst the US’s S&P500 Index has doubled.

In recent years, the Federal Reserve’s monetary policy has been more accommodating that the European Central Bank’s and the latter has largely focused on fiscal austerity. However, times change and, with Spain and Italy in recession and France and Germany being pulled towards the vortex, the ECB has announced a bold plan for unlimited bond purchase so as to reduce borrowing costs in periphery countries.

An investor friendly Federal Reserve has helped the S&P 500 index to recover strongly; however, in the meantime, US debt has increased by $4trillion and there may have to be a degree of fiscal austerity after the election. This may call into question the outperformance of US equities compared with their European counterparts.

: : Charles Sylvester is a stock broker with Charles Stanley & Co in Ipswich