With the markets at a crossroads, you need expert advice to choose the best investments for 2014
There’s life left in the markets rally yet but investors face headwinds over the coming months that could send some scurrying for shelter.
That’s the verdict of the investment experts asked by Scotland on Sunday to share their predictions for the year ahead.
A year ago, investors remained bearish even as pundits predicted better times ahead. Now, however, the roles are reversed – while private investors are growing in confidence the experts are becoming cautious.
But what do our experts think lies in store for investors in 2014? Read on to find out.
Alan Steel, Chairman of Alan Steel Asset Management
Last year we thought the FTSE would break through 6,500 and stay there. Sentiment was bearish and expectations subdued – good signs for contrarians. Now it’s different; sentiment has improved, profits are higher and even the bears are optimistic.
Meanwhile, however, US-based researchers Ned Davis are warning of rain clouds ahead that will probably giving us a dreich summer for stock markets.
So I’d keep with some caution, back quality firms and be prepared to press the confidence accelerator next autumn, probably when it will feel wrong to do so.
Where will the FTSE be at end of 2014? If we get to 7,000 or more we’ve won a watch. But there’s still value out there in the small caps area in particular, and all over the globe. For those that love a punt, India looks interesting. And remember that last year Greece was going belly up, allegedly.
What’s been the top stock market this year, and by miles? Aye, got it in one – Greece.
Tom Munro, Owner of Tom Munro Financial Solutions
A number of themes will dominate next year. Most will inevitably relate to policy-making at government and central bank level, most obviously the continued fret over the US QE taper and interest rate stimulus throughout most developed regions.
On the plus side, however, stronger than expected UK GDP statistics in the second two quarters of 2013 have pointed to an economic recovery at home, albeit fairly weak. However, I expect this is where investment opportunities will exist.
In addition to equities, UK commercial property should continue to deliver positive returns from the recovery which began in 2013. For your Isa investments consider three funds with a UK equity and commercial property focus that I am tipping to show strong performance next year – the Aviva Investors Property Trust, the Investec UK Special Situations and the AXA Framlington UK Select Opportunities.
David Thomson, Chief investment officer at VWM Wealth
Equities look relatively attractive and may prove a good option for investors in the year ahead. Accordingly, I remain positive on the outlook and predict that the FTSE 100 will end 2014 around 7,250.
But as usual I will be keeping a weather eye on markets, as it could all change quickly, particularly if government bonds collapse – my least favoured area. Western markets look a better bet than the Far East as their economies are improving while those in the East pause for breath.
Smaller companies in many regions have done well in 2013 and they may continue to be the main beneficiaries of improving economic conditions. For those seeking a degree of safety, property is a typical “late cycle” investment that may now be past the worst.
Haig Bathgate, Chief investment officer at Turcan Connell
While we think the global economy will continue to grow, this is to a degree already priced into stock markets, given the movements we’ve seen. So stock picking will be very important and we’re unlikely to see the indiscriminate buying that has been pushing markets up for a lot of this year.
The complication is that as the economy grows stronger so does the argument for withdrawing stimulus. Investors should not underestimate the impact of this. When Federal Reserve chairman Ben Bernanke first hinted at QE tapering back in May (clearly something he later reversed) the impact on markets was significant. We expect to see tapering in the US trigger a rerun of the bond bear market we saw in late 1993/early 1994. Traditional fixed income markets and corporate bonds in the main should be avoided.
William Hunter, Director of Hunter Wealth Management
We believe global markets will rise in 2014 and that UK plc is a great place to be holding stock. A strong pound versus the dollar has held us back a little latterly, but the strengthening dollar now the US fiscal cliff has abated will help UK companies enormously. Asset classes such as corporate and government bonds will weaken as interest rate rises are expected later in the year. This will flood into shares and drive prices much higher.
A fund well placed to take advantage of this is the Threadneedle UK, a proven performer with more than a billion pounds invested but not too big to be supertanker that takes a long time to move. It aims to benefit from at least two thirds of its assets in shares of companies in the UK or that have significant UK operations.