In the UK the economy continues to rumble along, with the IMF forecasting GDP growth of 3.2 per cent in 2014, the highest rate of growth of the G7 nations, significantly outstripping the estimated 2.2 per cent of the US and 2.3 per cent from Canada.

These figures, however, are only forecasts. Macro and geopolitical events can easily see the UK’s good fortunes change, with prime minister David Cameron suggesting in mid-November that in a global world it was impossible for the country to insulate itself completely.

But in spite of the UK economy flourishing, the FTSE All-Share index has delivered minimal returns for the year to date to November 14, at just 1.63 per cent.

In contrast the S&P 500 index has returned 18.29 per cent in the same period, while even Japan’s Nikkei 225 index has gained 2.24 per cent so far this year. But both these markets are now looking particularly expensive compared to other regions such as emerging markets.

John Ventre, portfolio manager of the Old Mutual Spectrum funds at Old Mutual Global Investors, explains: “The US is actually where we’re nervous, and that’s really on valuation grounds. The market looks to be trading at peak margins and accordingly peak earnings. If you exclude the 1997-2000 period – which was extraordinary and is unlikely to be repeated – they look as expensive as they’ve ever been against a backdrop of very little corporate growth.

“In the context of where we are in the economic cycle, it is hard to see a crash or serious correction, but we just think there are better opportunities elsewhere.”

Meanwhile, even though Japan’s latest GDP figures confirm a fall into recession Mr Ventre points out the market is as expensive as it has been in years, in spite of the poor economic outlook.

“Equities should be weak or cheap during recession [but] Japan’s equity market is both strong and expensive in spite of it being in recession. So you’re more or less beholden to the Bank of Japan doing more quantitative easing.”

Instead, the manager highlights the emerging markets that are “cheap and under-owned at the moment”, adding that with political tension in these markets likely to fade, there is a chance some of the valuations will be realised.

Pat Ryan, manager of the Lazard Global Equity Income fund, agrees the US is looking quite expensive, as its recovery has been priced in quite aggressively in its domestic market. However, the US recovery has not been priced into other parts of the world, particularly the emerging markets.

“We are seeing a sustainable recovery in the US economy. The US is the biggest economy and a sustainable recovery in the biggest economy in the world is good for equities everywhere, not just the US,” he explains.

“The world is broadly moving in a good direction. I think the issues facing Japan and Europe will be addressed by policymakers and will lead to at least modest positive growth. In that scenario emerging markets will catch up to the US.”

Although he warns: “If the recovery were to falter, the US looks most vulnerable because of that valuation and a lot of optimism priced into the US.”

Nyree Stewart is features editor at Investment Adviser