Investors and analysts spent a lot of 2013 talking about the “great rotation” – how floods of money would exit the fixed-income markets to the benefit of global stocks. It made for fantastic headlines, but more importantly, it seized a very elementary fact: that bonds weren’t looking as good as equities.
By the end of last year, however, it emerged that that there could, in fact, be buyers of both stocks AND bonds. And now another question has come to the fore: Will 2014 see another “great rotation”: a shift from outperforming stock markets back into the, comparatively speaking, underperforming European equities?
Let’s briefly recap. Despite the exhausting uncertainty over the global economic recovery and tapering of the U.S. Federal Reserve’s massive bond-buying program, stocks surged in 2013. U.S. equity markets catalogued their strongest year since 1997 with the S&P 500 putting on gains of 30 percent, the Nasdaq index was up 38 percent, and the Dow Jones gained 27 percent in its best year since 1995. The Dow and the S&P 500 both finished the year at record closing highs.
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