Morningstar's Market Update

2014 Round-up: Japanese equities have fallen in value, emerging market currencies are depressed, and bonds are outperforming equities

Andy Brunner 10 February, 2014 | 3:53PM

For much of January little changed as equities drifted higher although, for once, bond prices were following suit. Late month emerging market-led angst and disappointing data reports from the US and China, however, caused a complete turnaround such that, by month end, bonds had significantly outperformed equities and enjoyed their best start to a year since 2008. In some ways this was no great surprise, equities were overdue a setback and bonds were oversold, and indeed, UK government bonds recouped some 5% of their recent losses against equities. Investment grade corporate bonds performed in line with governments but with higher quality issues outperforming. Most commodities followed equities lower, with the exception of gold, and the only other asset producing strong gains was UK commercial property.

This was a month where quality outperformed

US Federal Reserve bond tapering continued on schedule, being reduced by another $10 billion at the recent FOMC meeting. In contrast, ECB President Draghi noted further monetary stimulus was possible and the BOJ is still expected to expand its balance sheet further in Q2.

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK

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