Risky asset markets have generally made a bright start to 2012. But our central scenario envisages a break-up of EMU this year initially involving Greece’s departure, an outcome that would presumably dampen investors’ optimism. Our forecasts assume stock markets in and around the euro-zone will be particularly badly affected, but we also expect US equity prices to fall. With the exception of precious metals, we anticipate the prices of most commodities will come under downward pressure, aided by a further strengthening of the dollar against the euro. Finally, we think falling inflation and safe-haven demand will drive the 10-year Treasury yield down to 1.5%.