Quilter Investors surveyed nearly 300 financial advisers and found two-thirds (66%) saw new variants and speed of global vaccination campaigns as the biggest concern for markets in the new year.
A further 19% saw the biggest risk to be higher than expected inflation, while around one in eight (12%) were most concerned about strong economic growth failing to materialise or being very short lived.
With the prospect on interest rate rises on the cards and inflation looking to be more than transitory, just 4% believed a central bank policy error was the biggest risk.
Volatility returned to markets recently following the discovery of the Omicron Covid variant.
On 26 November, the FTSE 100 suffered its worst session in more than a year declining some 3.6% as news of the latest variant hit equity markets.
In the US, the S&P 500 Index declined some 2.4% - its worst day since February 2021. Meanwhile, in Europe, the STOXX 50 Index fared even worse with a fall of almost 4% making it the worst day of 2021 so far for the index.
However, Quilter Investors is urging advisers and investors not to overreact to the new variant and the reintroduction of some health and social restrictions.
Danny Knight, head of investment directors at Quilter Investors, said: "While Covid is always going to be a concern while it is prevalent, Friday's volatility and Monday's quick recovery show that investors are increasingly coming to terms with life in the post-pandemic era.
"Indeed, the volatility witnessed is nothing compared to what we saw in 2020 and investors are becoming increasingly less concerned as to news of the next stage of the coronavirus' life cycle.
"This suggests that more fundamental market drivers such as company earnings, investor sentiment and the outlook for inflation and interest rates will play a far greater part in deciding how markets perform in the year ahead than the latest discoveries about the coronavirus and its variants.
Knight added: "Advisers and investors need to be alert to other risks as the recovery plays out. All eyes are going to be on central banks in the early part of next year as higher inflation continues to take root.
"Much of the recovery now depends more on their next move than what happens with the coronavirus, so one misstep could have serious ramifications for investors over the medium term."
He further said: "It could be argued the recovery has never looked so uncertain and as such diversification is going to play a crucial role.
Rather than Big Tech driving market gains, we are likely to see a broadening of returns and companies doing the heavy lifting. This will, however, require active decision making to harness these opportunities and is something advisers need to bear in mind as the year progresses."
