Market Viewpoints
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"What the New Year brings to you will depend a great deal on what you bring to the New Year"
The twinkling lights on the streets and cold morning air tell us it’s almost time for Christmas. It is time to bid a year farewell and welcome another one. As for the markets this year, the global economy has returned to trend-like growth, following a very weak start. Less fiscal tightening both in Europe and the US have played a major role in this economic recovery. This year, there was no US fiscal crisis; no hard landing in China; and the European Union managed to keep both the Euro and Eurozone intact. As a result, equities soared, gold collapsed and the bond market bull was dragged back and tethered. If the S&P ends near 1800 and the 10 year US treasury yield ends at 3%, equities will have outperformed bonds by +40% in total return terms – the highest ever. The year 2014 will be a year for cautious optimism. I am optimistic about the US but cautious about Europe. US equities continue to be a good long trade and Japanese equities are also a buy. Emerging Market (EM) equities had a great Q4 as a tactical long, however, I am wary to be long EM equities beyond January when ‘tapering’ talk will likely gain momentum. USD will strengthen more against EM currencies than the developed currencies.