Are we entering 2008 with unrealistic expectations? Not quite at every turn but at most, it strikes me that we do face unrealistic expectations.

Can we ignore history and decide that in the 21st century tribal factions can be overcome to make countries like Iraq, Afghanistan and now Kenya democratic and governable?

Is it prudent to assume that the London Olympics will come in on budget? Is it sensible for public sector workers – including MPs – to expect wage awards ahead of the rate of inflation?

Indeed, what is the rate of inflation affecting consumers right now? Rises in fuel, food and transport bills – the cornerstones of everyday life – would seem to mock official CPI figures and not only in this country. And is it realistic for landlords to expect upward rent reviews when the amount of retail space growth looks set to exceed lacklustre growth in demand?

Is it realistic for French consumers to expect to live like Croesus while working so few hours? And is it sensible for many consumers in the UK to expect to carry on spending more than they earn?

As the Christmas trading statement season draws to a close, it would seem that it has not been a disaster for all. There have been some reasonably healthy retail sectors, but most managements have taken the opportunity to encourage expectations for 2008/2009 in a downward direction. The question for investors is whether these corrections will be sufficient.

Contagion is an ugly process and an even uglier word. But the worry now is that contagion from the capital markets will begin to hurt the real world. More pragmatically, we have been worried for some months about the impact of falling asset values – particularly house prices – on consumer sentiment. This concern has crystallised into fact.

Come the start of the results season in March, more economic data will have been fed into the word factories of the City. A betting man – or even an investor – would not be surprised to find that data, and three more months’ trading experience, will encourage retailers to notch down 2008/2009 expectations again.

Meanwhile, experienced retailers seem to have already been buying to pessimistic budgets and giving themselves leeway to attempt late buys in the unlikely event that they are found to have been too gloomy.

2008 looks set to be a year when many consumers, countries and companies will get a reality check.

Paul Smiddy, head of retail research, HSBC