AT the start of 2013, analysts were circumspect about the prospects for equity markets for the year. The US recession was still a fresh memory, Europe remained mired in its sovereign debt crisis and there were still people betting on the end of the euro. In Japan, Shinzo Abe had just been elected prime minister. And gold was still viewed as a good hedge against global uncertainty.

As often happens, reality turned out to be quite different from expectations - in this case, substantially brighter. The benchmark S&P 500 jumped almost 30 per cent, the most since 1997. Buoyed by the potential positive impact of "Abenomics", the Japanese market did even better, with the Nikkei soaring 58 per cent - its best performance since 1972. The US economy recovered faster than most expected, with unemployment falling to a five- year low of 7 per cent by year-end, consumer confidence buoyant and housing prices firming. Gold was a victim of the US recovery, crashing 28 per cent after 12 successive years of increases. In the eurozone, the euro survived and a mild recovery got under way.

Looking at how 2013 turned out, caution should be the watchword for anyone making predictions for 2014. But that said, it's worth pointing to some trends that are likely to continue into this year - and some risks. One trend that seems likely to persist is the US recovery. With monetary policy still loose (despite the start of "tapering" by the US Federal Reserve) and the fiscal position and job market improving, it would take an unexpected shock to derail the economy, which the Fed forecasts will grow at 2.8-3.2 per cent. That forecast seems reasonable. But whether a stronger economy will translate into another banner year for stocks is harder to call. Much will depend on whether corporate earnings keep up with growth and how US companies deploy their vast holdings of cash. More mergers and acquisitions could happen, which could drive markets higher.