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The year in review


The events that shaped financial markets during 2014

There was a lot of action in the markets this year. Yet despite occasional bouts of heightened volatility, there were many bright spots from global equity and bond markets. Here’s a look at the events that shaped financial market returns in 2014.

Disparate central bank policies
Central bank policies were all over the map in 2014. Some of the highlights included:

  • The Bank of Canada held its key overnight lending rate at 1.0%, stating that the economy appeared sluggish and that exports were lower than desired. Energy prices declined dramatically, which is great for filling up your gas tank but a challenge for Canada’s huge resources sector.

  • The U.S Federal Reserve Board slowly brought its quantitative easing measures to completion. By the end of the year, investors were looking ahead to a possible increase in U.S. interest rates. Although higher interest rates aren’t necessarily great for stimulating economic growth, they do point to a strengthening U.S. economy, which is good for the world.

  • The European Central Bank took a different track. Amid high unemployment and a stalled economy, the central bank initiated negative deposit rates in order to force banks to lend more money.

  • Later in the year, the Bank of Japan increased its annual asset buying program to approximately US$725 billion per year. This move had a positive impact on equity markets.
 
The future of China’s economy
Is it slowing down? By how much? And for how long? These were the questions on many investors’ minds throughout 2014.
 
And, although it did appear that China’s economy began to slow, it is important to remember that the country’s growth is still pegged at around 7.0% to 7.5% over the year, which is dramatically higher than any developed country in the world. For example, Canada’s target economic growth rate is 2.0%.
 
Political unrest
News out of Ukraine, the Middle East and Africa was often unsettling. Despite these unfortunate developments, they had few longer-term effects on equity markets around the globe. Generally speaking, investors had measured responses to all the geopolitical uncertainty of 2014.
 
Although these events had short-term impacts of varying degrees, their long-term impact is impossible to predict.
 
Investing for the long-term, with a well-documented plan and the sound advice of an investment professional, can help you to avoid making rash decisions and keep you focused on your – and your family’s – financial goals.


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