The road to recovery

A year ago, markets and investors entered 2013 on a generally upbeat note, although this was mixed with unease over what might have been - a break-up of the eurozone or political differences plunging the US over the fiscal cliff of tax rises and spending cuts. There were hopes that the global economy would strengthen, corporate profits rise and equity markets generate healthy returns. However, in Britain, there was frustration and gloom that the turnaround was proving elusive. Optimism of the cautious variety was the attitude of the moment, based, in part, on faith in the ability of central bankers to buoy the global economy and markets.

Twelve months on and the optimism is less reserved, the global economy is on the mend and stock markets are in record-setting mode. Monetary policy will remain the focus for markets in 2014, while economic recovery in Britain and the US is underway. The US Federal Reserve this month starts the trimming of its monthly $85 billion bond purchases, with the reduction of $10 billion a month an acknowledgement of and further prompt for the world's largest economy's move back to normalcy. Although the end of quantitative easing is now in motion, the huge quantities of easy money generated will continue to influence markets in 2014 and beyond.

This week's bulletin also includes:

  • The US equity market opens 2014 with an economic recovery to back up its advances and a clear Fed policy to help sustain its positive motion.
  • Britain is one of the fastest growing economies in the developed world and has undergone Lazarus-like transformation.
  • Global investors have an appetite for eurozone equities, despite economic challenges including persistently low levels of inflation and the threat of deflation.
  • Uncertainty lingers over how emerging economies will fare as easy money dries up and western funds return from more exotic locations.

View this week's Market Bulletin, which contains thoughts and opinions of St. James's Place and our range of investment managers on the key issues affecting investors.

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