2014 has been a difficult time to be an investor, with no clear trends emerging to help guide them. Unfortunately Quarter two of 2014 has been one of mixed messages, with similar levels of modest growth from both the equity and fixed interest markets. The positive returns from both markets have led to significant debate amongst market commentators.

Normally, a rise in equity values would signify that the global recovery was continuing and we could expect interest rate rises, which would see the popularity of fixed interest assets wane and prices to fall. However, the fixed interest markets are rising, which is an indicator that equity markets can be expected to stall. So what are we to believe?

Historically, the most accurate ‘barometer’ has usually been the fixed interest market when there are contradictory indicators. Nevertheless, we cannot necessarily place the same level of trust in this being the case here. This is due to the continuation of the Quantitative Easing (QE) being undertaken by the Federal Reserve in the US and by the central banks of other countries worldwide. This has artificially held interest rates at historic lows and benefited the fixed interest markets due to the purchasing of vast amounts of fixed interest assets by these banks.

However, the Federal Reserve has already committed to terminate their stimulus operations by October of this year, which will result in a classic good news/bad news situation for the global economy. The good news is that the ‘weaning off’ of QE will allow the normalisation of markets, to the ultimate benefit of all, however, the bad news will be that there will inevitably be a period of uncertainty and nervousness in the markets, for whom it will be akin to a drug addict undergoing a detox.

It is not expected the subsequent rises in interest rates will be anything other than gradual, with there simply being a move from the ultra-low interest rates we currently enjoy to just very low interest rates. This is not expected to be detrimental to the economic recovery in general terms and any falls in equity classes should ultimately present long term investors with buying opportunities.

That said, the fixed interest markets will be more vulnerable, with the huge purchases made through QE ceasing, the market could suffer.

In the last quarter there has been a wide disparity of returns from different underlying asset classes within the equity and fixed interest markets, with the effect of geo-political developments in Ukraine, the Middle East and Gaza is weighing especially heavily.

In conclusion, this will be a difficult period, but that the overall the situation can be seen as positive and any negative short term market movements might perhaps provide buying opportunities.

The foregoing commentary is not intended to provide investment advice on its own, and remember that the value of investments may go down as well as up. If you would like our Financial Advisers to review your investments, or discuss new opportunities, please call 01224 581581 or email This email address is being protected from spambots. You need JavaScript enabled to view it. to make an appointment.