The first quarter of the year, in terms of the equity markets, pretty much played out as we predicted at the end of 2013, with a lot of to-ing and fro-ing, but markets generally remaining range-bound over the quarter. In fact U.S. equity investors saw the weakest first quarter in five years.
Emerging market equities once again had a weak quarter, with the worries over China and large current account deficits leading to large outflows from this asset class. The outflows did slow down towards the end of the quarter, as investors began to question whether the valuation gap between developed markets and emerging markets had become excessive and that perhaps an awful lot of the bad news had been priced in. To cite one example: Brazilian equities gained 7% in the last week of the year and that was after Brazil was downgraded by S&P.
The Quarter in Review - International Markets - Q1 2014