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Markets have defied expectations in 2014, leaving investors with few options
THIS was supposed to be the year when normal service resumed in the global economy and markets. As the recovery picked up steam, shares were expected to continue their rally and government bonds were projected to lose value (which would make the yield they pay rise), according to the consensus view.
But that is not what has happened. As of August 11th the Dow Jones Industrial Average was fractionally down on the year (the broader S&P 500 was up) and there were losses for the FTSE 100 in Britain, the CAC 40 in France, the DAX in Germany and the Topix 500 in Japan. Government-bond yields were testing historic lows, particularly in Germany, where the ten-year yield had dropped to 1.06% from 1.93% at the end of 2013; the yield on the equivalent Treasury bond had fallen to 2.42% from 3.03%.
The reasons that equity and bond markets have not conformed to the consensus view are many. First, some markets …
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