TD Asset Managment – The Year Ahead

The following is courtesy TD Asset Management and is posted with permission.

That hum you heard in the background throughout 2013? That was emanating from the U.S. Treasury’s printing presses, which were running at full throttle to keep up with the $85 billion the U.S. Federal Reserve (the Fed) was spending on long-term securities each month (“QE3”).

Other global central banks, most notably the Bank of Japan and European Central Bank, were also fully committed to expanding their balance sheets and together provided trillions of dollars of easy money to spur growth. Approximately two thirds of this excess liquidity ended up in financial markets, which meant they were well supported through the year.

Indeed, this support allowed equity markets to easily shrug off a variety of concerns during 2013, including potential sovereign defaults in Cyprus and the U.S., political uncertainty in Europe, slowing growth in China, sequester-related cutbacks in the U.S., a partial shutdown of the U.S. federal government and the possibility of an end to QE3, which led to a brief “taper tantrum.” In spite of some short-term volatility associated with these concerns, 2013 was a good year for equity markets, particularly those in the U.S., Japan and Europe – where equity markets produced double digit returns.

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