The winds of political change—or the doldrums of political and economic uncertainty—should weigh heavily on the minds of market participants over the rest of 2017, says Kristina Hooper, global market strategist at Atlanta-based Invesco.

“The market can be immune to these influences over the short term,” she says. “There are a lot of forces at work to help it along like the synchronized global recovery and accommodative monetary policy, but I believe that over the longer term markets factor in more reality. This is an environment where we want to be aware of our risks, even if they’re not being priced in and most investors are ignoring them.”

Hooper believes that the general upward bias to equity markets should continue, but that risks are growing. As of October 4, major benchmark indexes like the S&P 500, the Dow Jones Industrial Average and the Nasdaq 100 had posted double-digit returns year-to-date, but looming referendums and leadership changes, along with ambiguous policy making, cloud the outlook for the rest of the year.

Even as the bull charges on, Hooper says that the U.S. stock market is flashing some warning signals that disruptions are on the horizon.

“If you just want to follow a reversion to the mean argument, every day without a correction is a day that the risk for a correction increases,” she says. “I would say that the VIX is also a concern, with it being so low, because it doesn’t seem to be accurately reflecting risk.”

To deal with the uncertainties at home and abroad, Hooper recommends that investors seek diversified sources of investment income, embrace international stocks, and hold onto their municipal bond allocations even if they feel compelled to sell due to the potential for tax reforms.

Hooper recently discussed six trends she believes would dominate market discussions in this year's fourth quarter.

No. 1 – Threading The Needle With Interest Rates

Hooper expects that most of the developed world’s central banks will continue on a path of gradual normalization, led by the U.S. and Canada. The Bank of England also appears prepared to begin tightening it’s monetary policy once more, even as the official date for its exit from the European Union looms.

“Ten years ago, monetary policy was seen as accommodative because interest rates were poised to go lower,” she says. “Today, they’re poised to go higher, even if it’s not much higher. Central banks won’t fully normalize in the near term, and it may be that interest rates are never really normalized, but investors should remember that ten years ago, even with accommodative monetary policy, the financial crisis led the U.S. into a recession.”

No. 2 – Abe’s Gamble For Japan

Recently, Japanese Prime Minister Shinzo Abe called for snap elections, says Hooper, possibly to win a mandate for applying a stronger hand when dealing with North Korea and to gauge support for a stimulus package. However, recent snap elections, like those called by U.K. Prime Minister Theresa May, have resulted in weakened governments and less clarity on the direction of future policies. Any weakening of Abe’s position may also lead to a crippled Japanese economy.

No. 3 – Leadership Questions At the Fed

Hooper is pessimistic that Janet Yellen will continue as chair of the Federal Reserve after her current term is up early next year, as President Donald Trump has already started meeting with candidates for her position and is expected to announce a nominee sometime in the next few months. In addition, three other seats at the Fed are open, including the vice chair.

“Yellen’s recent speech at Jackson Hole hinted that she’s not really interested in a second term because she’s not interested in deregulation,” says Hooper. “I’m intrigued by the idea of a Neel Kashkari chairmanship, which could potentially be more dovish than Yellen’s, but with this administration, it could be someone who is an unknown quantity who causes some additional anxiety in the markets.”

Uncertainty around the president’s eventual selection hasn’t moved the markets to date, says Hooper, but that might change as we close in on an announcement, especially if Trump chooses a non-traditional nominee that faces intense Congressional scrutiny during the confirmation process. When named, the nominee might also provide some insight to market participants about the future course of monetary policy.

No. 4 – China Looks Forward

The 19th Congress of the Chinese Communist Party will be held later this month. The meetings—held every five years—set the stage for the country’s future political and economic leadership. This Congress, held at the midpoint of President Xi Jinping’s 10-year term, would typically include the emergence of a new leader likely to succeed the president at the end of his turn.

“My expectation is that President Xi will consolidate power, that will be telegraphed loud and clear through this Congress,” says Hooper. “If Xi is able to do this, I expect that he will be even more vocal with regards to the U.S. and push back more forcefully on criticisms on trade and North Korea.”

Hooper also says that the Chinese Congress will include an assessment on the country’s progress towards economic prosperity and social cohesion that will likely guide its political and economic agenda moving forward.

No. 5 – Europe’s Unity In Doubt

Over a year since the Brexit referendum surprised most analysts and onlookers, Europe remains strained by the forces of nationalism, notes Hooper. In recent elections, German voters dealt Chancellor Angel Merkel a setback when they forced her to form a coalition government with Germany’s liberal Green Party and pro-business Free Democratic Party.

Simultaneously, the government headed by British Prime Minister May prepares to navigate a March 2019 exit from the European Union. While May has previously been on record of supporting a “hard Brexit” in which much of the EU’s policies liberalizing trade and immigration are undone, in recent speeches she’s taken a softer tone. In addition, a recent referendum in Spain has touched off a political crisis as the Catalonia region chose succession in a vote deemed by the Spanish government to be illegitimate and unconstitutional

“We’ve noticed an inverse relationship between uncertainty and capital expenditure,” says Hooper. “So many companies don’t know what is happening, so they freeze. That kind of uncertainty can be really damaging to an economy.”

No. 6 – Tax Reform’s Lukewarm Prospects

While the Trump administration appears to have drawn a red line concerning, at a minimum, the reduction of the corporate tax rate to 20 percent, what a tax reform bill looks like is anyone’s guess, says Hooper.

“There are certainly some positive potentials for the tax bill in front of Congress right now, but the ultimate legislation, if passed, may look very different from the administration’s comprehensive wish list,” she says. “We have to look at the failure of three attempts to repeal and replace the healthcare reform as a reminder that it’s not so simple to form a coalition in Congress, even within a single party.”

While the current plan is broad, says Hooper, calling for lower corporate and household taxation and provisions to tax assets repatriated from overseas, it’s unclear if any Congressional Democrats will support the measure, especially if it includes the elimination of the estate tax and of state-and-local tax deductions. Hooper says that deficit-hawk Republicans, like Kentucky’s Rand Paul, might also balk at potentially increasing the deficit by reducing revenue absent any significant spending cuts.