Last year saw improved economic activity and reduced monetary and fiscal risks. 2014 promises more of the same. There is no denying that the US Fed’s easy money policy has helped greatly, but there have been real improvements in the US economy too. I believe that the Fed starting to pull away (albeit cautiously) will be viewed by the market as another step towards returning to normalcy. In 2014, around 40 countries go to the polls, representing 42% of the world’s population and more than half of its GDP. The political landscape particularly in the Emerging Markets (EM) could be very different by the end of the year. Incoming Fed Chair Janet Yellen has been an ardent proponent of an easy money policy to address the cyclical shortfalls of the labour market. The Fed under her stewardship, is likely to play down the 6.5% unemployment threshold and may even go a step further and reduce it to 6% or lower in Q1 of this year. Therefore, equities will have support throughout the year. In 2013, three-fourths of the S&P500 (SPX) return came from Price-to-Earnings multiple expansion, rather than higher earnings. This year, another +29% gain on the SPX is very unlikely. The healing process in Europe is underway, and more remedial action is expected this year. The European recovery theme, which investors endorsed in 2013, will remain alive in 2014 too. Perhaps 2014 is finally the year of positive Earnings-per-Share (EPS) in Europe. Japanese equities are a buy, but be prepared for volatility in March/April, around the time of the increased consumption tax coming into effect.