Stock markets across the globe rose last year - with investors in Japan, the US and the UK seeing the value of their investments rise. Despite these gains, analysts say equities are still the place to be in 2014.
Despite the ongoing bull market, stocks continue to look approximately fairly valued, says Matthew Coffina, editor of Morningstar StockInvestor.
The sage of Omaha himself Warren Buffett has revealed he is bullish about the US stock market - despite gains of more than 30% last year.
"American business will do fine over time," he said. "And stocks will do well just as certainly, since their late is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favour."
Equities are widely viewed as cheaper than bonds, but it is becoming harder to find attractively valued stocks since the stock market rally. Certain sectors have better prospects than others, and Eurozone stocks still remain undervalued.
Due to the specific impact of the successive eurozone crises since 2010, there appears to be substantial potential for European equities to catch up with other equity markets, says Kevin Lilley, manager of the Old Mutual European Equities fund.
“Not only is the European economy emerging from recession, the impact of self-imposed austerity measures is diminishing, removing a significant economic drag,” he said.
Russell Investments EMEA investment strategist, Wouter Sturkenboom, says that 2014 will be a year to remain invested in equities given relatively attractive valuations, but not to just buy and hold.
“Weak banks are throttling an already weak recovery, and divergence between markets is elevating socio-political risk, as such investors should keep a close eye on developments and adjust allocations accordingly,” he said.
Andrew Pease, Russell’s Global Head of Investment Strategy, added: “We may be headed towards a low-return world, but this is not a ‘set and forget it’ year. In this climate, we feel top-down active management becomes more important.”
Those in favour of active management should consider top-rated global equity funds run by the likes of Sebastian Lyon, manager of the Personal Assets Trust (PNL) and Tom Slater, manager of the Scottish Mortgage Trust (SMT) – both rated Gold by Morningstar closed-end fund analysts. Also highly rated and invested in global companies are Andrew Bell’s Witan Investment Trust (WTAN), Law Debenture Trust (LWDB) and the UK’s oldest investment trust; Foreign & Colonial (FRCL). All three are rated Silver.
