2014 turned out to be a bit of a disappointment for investors as markets generally were pretty flat, with the exception of the US market which posted strong gains.

 

The US economy is in a sweet spot; decent economic growth has followed extensive monetary engineering by the Fed’. The economy will benefit from low energy prices due to all the shale oil and fracking going on in parts of the country. The US is also regarded (rightly so) as a safe haven in a troubled world. With help from the strong dollar the market returned +9.3% to a UK investor.

 

The European markets were pretty flat reflecting the fact that the region is entering recession for the third time since the credit crunch in 2008. There is a battle going on between the ECB and the German Central Bank over whether monetary easing (QE) should take place. So far Germany has won the debate and so the Eurozone’s economy is stagnating. This was reflected in markets which only gained +1.0% over the year.

 

Emerging markets were mixed with Russia and Brazil posting negative returns and India and China well into positive territory. This dichotomy reflected the impact of the fall in the oil price; good for importing nations, bad for exporters – especially Russia which is facing severe austerity.

 

Most investment managers made decent calls on Emerging Markets, it was easy to avoid Brazil and Russia and to spot that India was going to be a winner. However, the resurgent Chinese market was less obvious to identify as the country suffered a property collapse this year and economic growth is slowing rapidly. Nonetheless the stock market boomed, catching everyone out.

 

Investors in fixed interest securities made money this year. This was a surprise as for years the professionals have been calling this area of investment a disaster waiting to happen. The strength in the fixed-income markets reflects the fact that we live in a disinflationary world – one where price increases are almost non-existent, due to falling food and energy costs (note, these have yet to arrive in the UK, but are on the way!).

 

Finally this leaves the bright spot for 2014; UK Commercial property. The market was in excellent form reflecting;

 

  • A shortage of properties in the City
  • Strong demand from overseas buyers
  • A buoyant UK economy
  • Lack of new building following the credit crunch
  • The strong rental income produced by properties in a yield-hungry world
  • The fact that at the start of 2014 commercial property prices were still 30% below levels last seen just before the credit crunch

 

We are pleased to say that most customers benefited from heavy exposure to commercial property, which explains the relatively good returns enjoyed last year.