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Overheating emerging markets, in China in particular, pose the biggest threat to the market and political situation in 2011 according to Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

"These economies are clearly overheating and governments are putting measures in place to slow them down to fight inflationary pressure. More than anything else, food inflation is a problem," Gijsels told

"In countries were 70 percent to 80 percent and sometimes more of a family's budget goes to food, explosive price rises risk to destabilize these societies. Remember the old saying: 'hunger starves civilizations,'" he added.

"We believe that some of these governments will be quite aggressive in their inflation fight. And we do not even want to think about the consequences if this year were to have a disappointing monsoon," Gijsels said.

He is worried that everyone is so bullish on China's ability to engineer a soft landing.

"There is almost no emerging market bear to be found. And that in itself is already scary," Gijsels said.

"Nobody will be surprised when we see more (economic) volatility in Europe or even the US. A stronger slowdown in emerging markets than we currently expect would take everybody by surprise. Therefore its market impact would be much more violent," he added.

Watch the Central Banks

Gijsels said he was surprised how quickly the market tested Portugal and the EU's resolve to protect it in 2011 but believes the ECB has now drawn a line in the sand.

"The ECB responded by supporting the bond markets of the weaker countries and were able to make the first couple of important auctions of the year into a success. It looks like the ECB has drawn a line in the sand around Portugal, first and foremost to defend Spain," he said.

"They just cannot let one or more countries fail for they would risk a repeat of the Lehman Brothers' debacle on a national level," Gijsels added.

Last year, the main positive development was the central banks and governments were able to "keep the system afloat," but the main disappointment was that they were unable to normalize monetary conditions and had to put more exceptional measures in place, according to Gijsels.

"Still, the resolve to not let the world economy slip into a Japanese or US depression of the '30s scenario is also very 2011 we will be more than anything else Fed, ECB and PBOC watchers," he said.