Recently bad weather and holidays are playing havoc with global economic numbers, but the market seems indifferent with the rally continuing after a sell-off early in the year. Even emerging markets, which took a huge hit recently, are up 7% since the market turned in February.

In the US, economic numbers have been weaker than expected owing to poor weather on the east coast impacting construction, manufacturing and retail sales.

It’s the opposite story in China, where import and export numbers have come in stronger than expected. But investors remain wary of China and are putting the gains down to warmer weather and the Chinese New Year.  For a more reliable reading, investors will wait for February’s numbers and calculate an average across the two months.

The European region posted economic growth of 0.3% in the final quarter of 2013. This beats growth of 0.1% in the previous quarter and marks the third quarter of growth since the end of the 18-month recession.

This rate of growth in Europe is not enough to reduce the high levels of unemployment or reduce the elevated debt levels, but it’s all heading in the right direction.

Despite the mixed bag of data, most markets rallied last week. The question remains why they are pushing higher following the pull back in January?

Our theory is that after a sustained rally throughout 2013, markets were looking for an excuse to pull back. This came in the form of an emerging market crisis and QE tapering – the key point is that it was an excuse not a cause.

More broadly, the fundamentals remain sound with good earnings both here and in the US. We remain bullish on the market, although we don’t expect it to resume its uptrend until March.
Bucking the trend is Japan, which is struggling to recover after being sold down 15% since the start of the year.

The main cause has been the currency, which unexpectedly strengthened during January and February.  It’s a big story in FX land, as markets were expecting US QE tapering to strengthen the USD against the Yen – not the other way around.

The volatility of the Japanese equity market could throw a spanner into the works of the current global rally but the recent announcement by the BOJ to loosen monetary conditions again has provided support to the equity market.

We also believe investors will shift their focus from value stocks to growth stocks this year as they decide where to put their money. We are seeing this in the US where the NASDAQ is making 13-year highs whilst the DOW and S&P500 are still below new record highs made in January.