Financial markets will continue to improve in 2012, but there are risks that could bring them back down again.

Ed Keon, managing director of Quantitative Management Associates, said that the world is experiencing uncertain times. He pointed out that Europe is his top concern, but noted that China, India and other economies and global hot spots could face major problems in 2012 that could disrupt U.S. markets.

"A stronger-than-expected 2012 stock market is more likely than a very weak one, with U.S. economic data on employment, housing and manufacturing consistently better than expected for months now," said Keon, speaking at Prudential Financial Inc.'s 2012 Global Economic and Retirement Outlook briefing in New York. "True, some of that is due to temporary factors, and a likely recession in Europe, weak U.S. income growth and ongoing concerns about household real estate are likely to constrain growth in 2012. But the financial obligations ratio is at a generational low, suggesting that on average—even though many families continue to struggle—folks are finding it easier to pay their bills now than they have in a generation. Household de-leveraging might be in the seventh or eighth inning, and the drag from this might be mostly over. And any improvement in Europe could lead to a major rally. So 2012 could look a lot better than 2011, provided the U.S. continues to heal and if—and it's a big if—other trouble spots don't bite us."