Some scope for contrarians in 2014

FORECASTING how an entire year might pan out is always hugely daunting because of the uncertainties involved, but now the overwhelming majority of investment strategists are predicting an economic recovery for the US and Europe in 2014 and are recommending buying those "developed" markets or DMs. The expected return is quite modest at a high single-digit, with 10 per cent the upper limit.

Asia, classified as one large "emerging market" or EM (except for Japan, which is categorised as a DM) is mainly seen as "underweight", though export-oriented economies with exposure to the DMs recovery are said to be worth considering. Among these would be Korea, Taiwan and Singapore, though the latter is not as universally recommended as the others and could owe its inclusion in some "buy" lists to its traditional "defensive" reputation.

Rarely has there been such agreement among analysts with such certainty in forecasting. Investors, reading between the lines of these recommendations, should draw encouragement that in effect, analysts think that markets will revert to being driven by economics/fundamentals instead of being liquidity-driven as they have been for several years now. If this really happens, it would certainly be welcome.