Fundamentals and nasty surprises are on investors minds heading into February, with big tests in the coming week about jobs and inflation and increasing worries over Egypt and its region.
The latter has already hit oil prices and has started to rattle equities. U.S. crude oil futures ended more than 4 percent higher Friday, on concerns the civil unrest in Egypt could spread and threaten stability in the Middle East.
Overall, however, the first month of the year has been a good one for investors willing to take on some risk.
Until Friday's sell off, global equities were gaining at a rate that would have produced one of the best years in the past four decades.
Assets such as short-term high-yielding bonds have also been in favor, while supposedly safe-haven developed market sovereign debt has suffered.
This is all based on a consensus that arose toward the end of last year that leading developed economies -- the United States, the euro zone and even Japan -- were likely to become more dynamic.
It has prompted a significant shift by investors away from potentially overbought emerging markets into developed ones.
But it is also dependent on underlying evidence the big economies are improving and that consumers -- the ultimate arbiters -- will see this and act accordingly by spending.
Friday's U.S. growth data will have added to the view of slow but steady improvement.
The coming week will be more about the way improving growth has filtered down to consumers. The big data release, as usual, will be the U.S. jobs report Friday, but the euro zone employment picture will also be on view Tuesday.
Employment growth tends to lag the wider recovery, but to date it has been anemic, prompting a degree of volatility.
It is a fairly shallow jobless recovery, and that will make markets move up and down, said Franz Wenzel, a strategist with AXA Investment Managers in Paris.
Despite the renewed growth hopes, meanwhile, there are severe underlying imbalances in many developed economies that may rise up to haunt investors betting on overall improvement.
The International Monetary Fund said in the past week the United States and Japan needed to spell out credible deficit-cutting plans before financial markets started punishing them by selling off their bonds.
Ratings agency Standard & Poor's went as far as cutting Japan's long-term debt rating and Moody's Investors Service said the risk of the United States losing its top AAA rating, although small, was rising.
This is disturbing talk for investors and prompted downward pressure on Japanese assets such as the yen and stocks even though some, like Goldman Sachs, have recently been encouraging investors to look at Japan.
The flip side of growth is inflation, and this too is becoming a worry for some investors. Some of the recent shift into developed market equities, for example, has been promoted by fears of central bank tightening in emerging markets as a result of sharp price rises.
Inflation in the euro zone may be the new concern, with data due Monday and a European Central Bank meeting Thursday.
Some policymakers have fired warning shots, in particular, Lorenzo Bini Smaghi, one of six ECB board members.
He said during the past week that sharper rises in prices of commodities and emerging economy-made goods could push up euro zone inflation unless domestic prices were controlled.
The prospect of higher euro zone interest rates drove the euro higher against other currencies -- a potential problem, if sustained, for exporters -- and promoted bond yields to rise.
Britain too has seen inflation rise to levels where some investors are beginning to price in an interest rate hike.
Tighter monetary policy against a background of only tentative economic recovery would be a threat to the consensus being formed by investors.
For the moment, however, investors seem relaxed.
Inflation is currently above the ECB's price target of 2 percent, private bank Sarasin said in a note. (But) the ECB will look through (the) base effect from higher energy prices in their monthly meeting. We expect the ECB to leave interest rates at the current level in 2011.
What few, if any, large investors foresaw in their 2011 outlooks, however, was the potential for an entire region to come under sudden scrutiny as North Africa and the Middle East has in recent weeks.
The focus is on Egypt, where President Hosni Mubarak's long grip on power is being threatened by huge demonstrations.
For global investors the specific stakes are small. Over the past five years, overseas investors have accounted for 15.9 percent of the Cairo stock exchange's total trading value of less than $500 billion for the period.
As for the region, Middle East and North Africa funds had net inflows of $237 million in 2010, according to EPFR Global, although more came in through frontier market funds.
So, the money stakes are not the issue. What investors will be watching for in the coming week is how much the crisis spreads and triggers a broader flight to safety from emerging markets and riskier assets.
(Graphics by Scott Barber; Editing by Dan Lalor)