However, it has been a slow start with a sharp sell-off throughout January reminding us that it will not be plain sailing.

The main cause for concern seems to be the emerging market economies, where weak currencies and steep inflation have hindered exports. In Europe we have recently seen the Turkish Lira fall to a record low of 2.3 against the dollar, whilst in South Africa the rand has hit a five and a half year low.

US monetary policy remains the main driving force behind the global economy, particularly affecting emerging market economies which are reliant on exporting goods. With the Federal Reserve expected to further reduce quantitative easing and return to normal monetary policy, there is widespread concern that rising interest rates and a strengthening dollar against emerging market currencies could have a negative impact on those economies.

News coming out of Asia seems to indicate that China faces growing concern over its credit risk and local-government debt has soared 70% since 2009 raising concern over the stability of China’s financial system. Outside of China, the Bank of Japan has hinted at a halt to additional monetary stimulus and a move towards an exit of QE.

The concern over worldwide monetary policies has led to a surprising rally in global bonds and it is perhaps no surprise that we have seen the gold price hit a three month high as investors seek methods of counteracting the volatile equity markets of the last month.

However, there is certainly cause for optimism closer to home. Recent figures indicate that UK business optimism has hit a 22 year high and unemployment is down to 7.1%. We have also witnessed a strong period for UK retail sales which have grown at the fastest rate since 2011. With unemployment falling ever closer to Mark Carney’s 7% target, we could soon witness tightening of monetary stimulus in the UK and possibly an increase in interest rates later this year.

The Eurozone is also continuing to show signs of growth, albeit at a painfully slow rate. Forward looking survey data is suggesting the Eurozone economy is continuing to expand steadily, however unemployment figures of approximately 12% and very low rates of inflation suggest a full recovery is still some way off and further cuts to interest rates may be made in the coming months.

Outlook

We remain positive on equities over the medium to long term and believe that the recent January sell-off could represent a good buying opportunity, particularly if broker reports of a strong year ahead for equities are to be believed.

A close eye must be kept on the US Federal Reserve as further tapering of QE is likely to affect emerging markets by the weakening of their currency against the dollar. Other global monetary policies will continue to be closely monitored as the recovery worldwide continues.

We expect the recent rally in global bond purchases will be short lived and as global market stability returns, it looks likely that most economies will be well set to grow. Aside from currency issues, the outlook for the majority of economies looks fairly positive with 80% of countries surveyed by Markit seeing expansion in their respective manufacturing sectors, a good indicator for economic growth.

The effects of tightening monetary policy are being felt worldwide and in the short term we may see some emerging market economies struggle as a result, however it can only be a good thing that we are finally starting to see an end to aggressive stimulus policies and taking a long term view, we expect markets to stabilise and continue to offer attractive returns as a result.

Please note, our Investment Commentary is our view of markets and does not constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch.