This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Adrian Lowcock highlights five themes that could lead market returns next year.
Gold
Gold bullion has fallen in value by 27% so far in 2013 leaving it on course to lose investors’ money for the first time in the past 14 years. Shares in gold mining companies have fallen 53%. Gold has become unpopular with investors and could remain out of favour in 2014 as investors switch from defensive assets into equities to take advantage of improving economic growth. Gold mining shares now trade below their book value, with a Price to Book ratio of 0.93, the lowest since January 1980. There appears to be value here for a long-term investor, however, momentum remains negative and catching a falling knife requires some bravery.
Mergers and Acquisitions
M&A activity has been sluggish since the financial crisis, but is set to increase in 2014. Companies have cut costs and build up the cash on their balance sheets - they now have money to spend and the improving economic outlook should give them confidence to do it. Fund managers are reporting a pick-up in M&A activity and this could really help fund managers such as Tom Dobell of 
Gold rated M&G Recovery.
Japan
2014 could see further gains for Japanese shares. The Topix index has risen 25% so far in 2013, while company earnings have risen 17%. Analysis by Hargreaves Lansdown shows Japanese shares continue to look good value with the Topix among the cheapest of the major stock markets. In 2014 the introduction of a Nippon ISA should encourage Japanese investors back into the stock market.
US Tapering QE
Tapering might start as soon as this week but its effects and the impact on economies, currencies and stock markets will be felt throughout 2014. It is difficult to predict the full effects and investors will watch the US closely for any signs of economic slowdown which could cause markets to overreact in the short term. Tapering is a sign of an improving US economy so investors should look to add to their equity exposure by buying the dips.
Active Management
2013 has been a good year for investors. The FTSE All Share is up 15% so far. However, investors cannot rely on this strong performance being repeated in 2014. Following that rise many stock markets are no longer as good value as they were. In this climate active investing, picking the right companies, sectors and countries will help investors out-perform. Investors concerned about market levels could consider other funds for example Targeted Absolute Return.
