Expect more ups and downs in equities in 2104

Experts predict continued US growth, struggles in emerging markets, and a slide for gold, reports Simon Read
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The global economy will accelerate in 2014, with the upside coming from the United States, according to Eric Chaney, chief economist of the AXA Group.

He predicts: "The end of consumer deleveraging and a more benign fiscal stance will spur domestic demand in the US. Healthier economic activity will convince the Fed to gradually remove quantitative easing while reinforcing interest rate forward guidance."

The US election this year could also help investment, said Keith Wade, chief economist at Schroders. "Politicians will be focusing on the elections later on in 2014 and will realise that the problems they created by threatening a default were very unpopular with the public and won't want to repeat that."

Elsewhere? Growth in Europe should continue improving, fuelled by stronger external and stabilised domestic demand, said Mr Chaney.

"Investors can look forward to a sluggish recovery across Europe through 2014," predicted Azad Zangana, Schroders' European economist. "I expect core Europe – Germany, France, Sweden and even Austria – to really outperform peripheral Europe."

Meanwhile emerging countries' currencies will remain under pressure even though foreign demand should help growth to improve, warned Mr Chaney. Mr Wade is also cautious.

"We have just seen the Plenum in China which will result in some disruption to the economy over the next year or two, so growth will probably struggle a little bit against that headwind."

Meanwhile Nancy Curtin, chief investment officer at Close Brothers, warned: "Fixed income and commodities, bar natural gas, had a difficult time in 2013 and we anticipate they will continue to look less attractive options than equities."

Ian Spreadbury, manager of Fidelity MoneyBuilder Income funds, said he expects rates to stay low for some time and is protecting himself against rising systemic risk by avoiding overconcentration in vulnerable sectors.

And there was also a warning that those who continue to back gold, despite the yellow metal's price drifting downwards over the past two years, may not find any solace this year. "Gold is likely to drift lower and I expect it to trade through $1000 per oz over the next 12-18 months," said Stephen Ford, head of investment management at Brewin Dolphin.