Our Opinion: 2014
What’s in store for 2014?
Last year was fantastic for markets. Almost everything (except gold which had its worst annual showing since 1981) went up. Japan was the standout, rising more than 50% and the US delivered a healthy 25% gain.
What is in store in 2014? I have always said that the recent economic woes started with the US housing market and there will never be a true recovery until we see progress there. And progress there is, with more than a million new homes being built – 30% more than a year ago.
The World Bank expects the global economy to grow by 3% this year – with almost half of that growth coming from just two countries – the US and China. Those countries have real challenges though this year. Profit margins in US companies are at record highs (predominantly through lower wage costs) likely to revert this year as unemployment falls. China may be doing well but much of its economy remains dependent on a credit bubble that its leaders need to carefully contain.
Elsewhere, the UK housing market is dependent on the lowest interest rates for 300 years continuing, the European problems are far from fixed and the emerging markets are continuing their run of poor performance (notably Turkey).
In brief, I believe Japan, UK, Europe and Russia carry real opportunities for 2014, whilst I am cautiously optimistic on China and feel the attractive yields offered by energy firms will support valuations.
Of course, every client is different, and his or her perception of risk is different. We look forward to working closely with Discretionary Fund Managers to ensure our clients have access to the very best investment management in what will be an exciting year.