The US and Japan were 2013’s winners

But their gains, especially in the case of the US, were at the expense of developing markets where productivity is waning, as highlighted by the 4 per cent drop in the MSCI Emerging Markets index, which has continued to tumble into 2014.

Rising labour costs are squeezing profit margins in emerging markets, most notably in China, and in turn driving the repatriation of manufacturing and services to the US.

While China is still expected to remain supportive to global growth, professional investors are putting their faith in mature markets.

A cursory glance at fund performance in the year to January 10 perhaps highlights why, as the average global emerging market fund has plunged by 8 per cent while the global equity sector has achieved a mean return of 16 per cent.

A further reduction of the US’s massive quantitative easing stimulus may cause some wobbles but overall, the attitude to tapering appears to have become less strained. However, the investment world still is, and will be for the foreseeable future, heavily influenced by central banks.

But further economic growth is anticipated. The International Monetary Fund expects global growth in purchasing power parity terms to increase from 2.9 per cent year-on-year in 2013 to 3.6 per cent year-on-year in 2014, the highest rate of global growth since 2011.

David Coombs, head of multi-asset investments at Rathbone Unit Trust Management, says: “2014 is a year in which developed equities will remain the place to be, with the focus very much on domestic earners.”

Mr Coombs remains overweight US equities, especially domestic US, which he believes should benefit from the recovery and look much more attractive, on a valuation basis, than the ‘mega’ stocks.

But as America benefits from a slowdown in Asia, and more specifically China, the cost of raw materials has dropped back for US manufacturers. This scenario has been bolstered by falling energy prices through the availability of cheap oil and natural gas, as a result of the development of fracking. The upshot of which is that it is enabling US energy producers to tap into huge reserves at low cost notes John Chatfeild-Roberts, chief investment officer at Jupiter Asset Management. He says: “Wage inflation in China has also escalated, which combined with the energy advantage is helping US companies become considerably more competitive.

“As a result, US corporates are in good shape but they need to have the confidence to invest their cash balances, and this is definitely taking quite a time.”

Confidence is also continuing to ride high in regard to Japanese equities, where in spite of the Topix already having delivered more than 80 per cent since November 2012, sentiment says there is still value to be had as companies there have benefited from massive earnings upgrades.

Meanwhile, so-called ‘Abenomics’ – a policy of unprecedented monetary stimulus – has already impacted the real economy.

James de Bunsen, fund manager on the multi-asset team at Henderson Global Investors, says: “Whereas other developed equity markets have been driven almost exclusively by share buybacks and multiple expansion, corporate Japan has actually grown profits, consequently valuations in Japan relative to elsewhere still look attractive.”

Mr Chatfeild-Roberts also believes Japanese equities have the potential to deliver decent returns to investors in 2014 highlighting that on the back of the government’s measures, there are now signs that mild inflation is being successfully injected into the veins of their economy.

He says: “The stockmarket has responded with a renewed sense of optimism and valuations are reasonable relative to other developed markets.”

But while Japanese equities may be vulnerable to a pullback at some stage, Mr de Bunsen is confident that efforts will be redoubled to boost sentiment and markets in any such event.

While the UK continues to mend, it still however has the same issues as the US; chiefly it is being buoyed with significant monetary easing.

But the government’s Help-to-Buy initiative has kickstarted a renaissance in the UK property sector, which in turn is driving other parts of the market and economy. Mr Chatfeild-Roberts says: “Employment levels are improving, the consumer is feeling more confident, and the UK economy is gaining traction. The UK stockmarket is by no means as cheap as it was but I believe there are still opportunities for active fund managers to pursue.”

Philip Scott is a freelance journalist

Developed markets Vs Emerging Markets

Stockmarket

Developed markets : US equities performed extremely well in 2013 with the S&P 500 producing a strong return of 29.1 per cent, while the Topix delivered 24.67 per cent and the FTSE All-Share produced 20.81 per cent.

Emerging markets: The MSCI EM index disappointed in 2013 registering a loss of 4.41 per cent while of the four Bric countries the MSCI Brazil index posted the worst loss of 17.6 per cent.

GDP Growth

Developed Markets: The OECD has estimated real GDP growth in the US will improve markedly in 2014 to 2.9 per cent from 1.7 per cent in 2013, while the euro area will also see improvements to 1 per cent GDP growth

Emerging markets: The outlook is mixed with the OECD noting China will “remain weaker than previously projected in most other major emerging market economies”. But that countries such as Chile, Turkey, Mexico, Korea and Israel “will continue out-pacing growth in other advanced economies”.

Politics

Developed markets: Political pressures in the developed world seem to have eased as austerity starts to work, while in Japan prime minister Abe implements his three arrows of reforms. The next uncertainty will be the UK election in May 2015 and the possibility of a new party in government perhaps altering the UK’s economic plans.

Emerging markets: China is the leading light in the region but the recent appointment of president Xi Jinping and premier Li Keqiang in the past two years has helped ease fears of a Chinese hard landing and kept a focus on the country’s move towards a more domestic service economy.