Two key factors dominating the current market and economic environment are policy ( both fiscal and monetary, but mainly monetary) and economic growth. Post the market crash of 2008/2009, policy across the globe has been geared at reviving economic growth, which has seen interest rates reduced to record low levels. A gradual synchronization of economic growth across the major economic hubs of the USA, Japan, Europe and Japan in the latter half of 2013, fuelled expectations of policy rate normalisation, with the FED beginning this initiative through the tapering of its quantitative easing policy. In addition to aggressive pricing of interest rate hikes within both local and offshore forward rate markets, this saw a partial reversal of capital flows from emerging markets to developed markets, and consequently resulted in significant losses being experienced across most emerging market assets as well as currencies.

The negative inflation implications associated with the substantially weaker currencies, saw a broad based de-rating across all local fixed interest asset classes, with the exception of local cash, in January, as shown in the performance table below.

Stringfellow – Q12014 Investment Report