analysis
news
04
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THE INVESTOR
markets
developed world leads the way
Last year was an outstanding one for stock markets, at least in the developed world, with the UK, US and
European markets continuing their steady rise from 2009. Five-year returns for developed markets are also now
looking extremely healthy, with the US – where the economic recovery is most advanced – having all but
doubled since the start of 2009.The so-called ‘lost years’ for equities now seems to be firmly behind us.The
Japanese Nikkei is also celebrating the apparent success of the Abenomics recovery programme with a
convincing rise last year, which many commentators believe could mark the end of two lost decades for
Japanese shares. Property has also been enjoying its best performance in years, as explained in our Viewpoint
article on page 22, as growing economic confidence has spurred demand both from tenants looking for new
space and from investors looking to add to their portfolios of real assets.
It has not all been good news: government and corporate bonds fell over the year, while the major Asian
markets, outside Japan, were buffeted by turbulence following the US Federal Reserve’s announcement that it
was thinking about when and how to start tapering its quantitative easing (QE) programme of support for
financial markets.The Hang Seng in Hong Kong made little progress, while other countries, such as Brazil, had
an even more torrid time.
While the Fed’s announcement last December that it would start tapering by $10 billion a month did not
initially upset the markets, there is still some uncertainty about the impact it will have on interest rates and asset
prices this year. Emerging markets are likely to remain unsettled until it is clear that investors are no longer
withdrawing funds as the prolonged period of low interest rates comes to an end.The economic news is getting
better in the US and the UK, while in Europe things are not getting any worse at least.With a following
economic wind and no unexpected financial shocks, 2014 may prove to be another positive year for investors.
n
See ‘Broaden your horizons’, p16
