By Ashley Owen

In 2014, all the major asset classes generated positive returns and beat inflation and cash, like in 2012 and 2013. Slowing economies, recessions, war in the Middle East, fears of deflation in Europe and of rate hikes in the US did not prevent 2014 from being another good year for investors. Prices of housing and direct commercial properties were also stronger this year, driven by cheap debt and foreign buying.

Shares had a good year globally, driven by low interest rates and cost-cutting. Bonds also did well globally, with yields falling across the board in almost all countries as investors chased yield in a low-yield world as a result of record low interest rates, money-printing and asset-buying by central banks.

The lower part of the chart tells a different story: commodity prices collapsed mainly due to over supply. This hit share prices in Australia’s overweight mining sector, and it also battered tax revenues, sending the government budget into another huge deficit, adversely affecting consumer and business confidence and spending. Falling prices are also causing mines to be closed and new resource projects to be delayed, scaled back or abandoned.

Ashley Owen is Joint CEO of Philo Capital Advisers and a director and adviser to the Third Link Growth Fund. This article is educational only. It is not personal financial advice and does not consider the circumstances of any individual.

This article appears courtesy of Cuffelinks (www.cuffelinks.com.au)