Market Research

2014 Brings Stable Markets, Risky Emerging Economies & An Independent Scotland - Brewin Dolphin

Sandra Kilhof, Reporter, London, 20 December 2013

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UK wealth manager Brewin Dolphin names Scottish independence, European economic recovery, financial planning for retirement and an increased bearish attitude towards emerging markets, as some of its top investment predictions for 2014.

The industry must not become complacent in 2014, as the
economy starts to recover and markets stabilize. At least that is the
recommendation from the UK
wealth manager, Brewin Dolphin, which names Scottish independence, European
economic recovery, financial planning for retirement and an increased bearish
attitude towards emerging markets, as some of its top investment predictions
for 2014.

Particularly, the firm’s chief executive David Nicol foresees
a tight race over Scottish Independence and warns financial services firm’s
about remaining complacent, in this respect.

“There are a number of critical issues including the currency
to be debated and many questions to be answered,” Nicol said. “We will be
formally asking the Scottish Government about the reach of their proposed
regulatory institutions for financial services in Scotland and their implications for
clients”.

Global markets: 2014
is the perfect calm

Looking at the broader market, the firm said that gold is
likely to drift lower as the economic recovery continues, and a reduced level
of QE from the US
central bank should see longer dated interest rates rise and raise the
opportunity cost associated with the precious metal.

In addition, Europe remains
cheap, unloved and under owned - a good bet for investors with ambition and a huge
appetite for risk, the firm said.

“If 2008 was the perfect storm for investors, with just
about every asset class falling, 2014 is shaping up to be its antithesis – the perfect calm. The
economic environment looks stable and improving, central banks seem reluctant
to choke off any nascent recovery, leading to a continuation of the ultra-low
interest rate world. The background, then, is conducive for investors and is
reflected in our expectations of decent returns for equity markets –
particularly developed ones – over the year ahead,” said Rob Burgeman, Brewin
Dolphin’s director of investment management.

To this end, the firm said that given the benign global
backdrop expected in 2014, investors should shift their attention from income
and yield, to capital appreciation.

Emerging markets
continue downwards

In comparison, now is not the time to invest in emerging
markets, the statement said,  as rising
transportation costs, deteriorating energy competitiveness and general national
unrest, makes investments in Thailand,
the Ukraine and Brazil highly
risky. Instead, the firm suggests that investors focus on more developed emerging
markets like Korea,
which is likely to rebound well following its recent slowdown.

The Asian region also offers a strong opportunity for
investors looking to capitalise on Japan’s extraordinary inflationary
policies, said head of portfolio strategy, Guy Foster.

“The yen is falling to 120 to the dollar; whether it gets
there in 2014 remains to be seen, but we expect these extraordinary policies
pursuing inflation to remain potent forces of value creation for investors.”

Lastly, the firm’s director of financial planning, Nick
Oliver, suggested that now is the time to make grand-children millionaires
through prudent financial planning and long-term pension funds.

“Putting £300 a month into a (grand) child pension could not
only turn them into pension millionaires when they retire, but during their
working careers, they can use their fund for commercial property, even if it is
linked to their business. This will be good for a potentially debt-laden
generation,” Oliver explained, referring to the on-going global rise in youth
unemployment.

UK-listed Brewin Dolphin has over £28 billion of funds under
management as at 19 December 2013.

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