On the surface the second quarter of 2014 looks like everything was rosy with global equity markets moving up noticeably over the quarter. However, this masks a number of issues beneath the surface. The geopolitical tensions arising from Ukraine during the first quarter continued into the second quarter, and before the end of the quarter tensions in the Middle East, focused around the uprising of ISIS (The Islamic State in Iraq and the Levant) in Iraq and neighbouring countries, had become the new focus of geopolitical tension. The former remains an issue, but the later is receiving more significant headlines, and could more directly impact the global economic environment through supply pressures on oil and consequences for the oil price. However, despite these concerns markets have remained optimistic and shrugged off more fundamental issues of very weak US first quarter GDP growth, and the challenges to Chinese authorities to maintain economic growth at or above the 7% level. On a positive front Japan continued to push through with reforms, though the success of these remains to be seen, while the European Central Bank took further measures in early June to provide additional stimulus to the euro-zone economy.

For the quarter European equity markets, as measured by the MSCI Europe Index, rose by 3.30%. The rise in markets started steadily with both April and May producing positive returns of 2.49% and 0.89% respectively. However in June markets moved sideways over the month as a whole and ended up declining -0.10%. As a result Europe lagged the overall Global market in US dollar terms over the quarter. This means that European markets have risen by almost 5.5% in 2014 so far, and are up by over 29% in the last 12 months. The pace of these rises is expected to moderate unless corporate earnings growth is delivered, otherwise valuation metrics will look increasingly stretched, although the European market looks less stretched compared to some of the other regional equity markets.

The third quarter was dominated primarily by debate and anticipation of when the US Federal Reserve would begin to start reigning in quantitative easing and hence withdrawing their stimulus. This followed the Federal Reserve's comments in May, which increasingly over the quarter led investors to expect this policy withdrawal to be formally announced at the September meeting. However, when the meeting finally came about the US Federal Reserve decided not to commence such a strategy, citing on-going weakness in the US economy.

This caught investors somewhat by surprise and has consequently led to anticipation of a more opaque period in US monetary policy, as the US Federal Reserve determines when it is best to start implementing the strategy and investors start to predict such a course of action. Due to the new uncertainty created it is also now not clear, as the market had been anticipating, that the tapering of quantitative easing will definitely commence in 2013.

The uncertainty around US monetary policy is further complicated by the revised expectation of Janet Yellen becoming the new front-runner for US Federal Reserve Chairman.

Despite investors' concerns and fears equity markets made strong progress over the third quarter. European equity markets as measured by the MSCI Europe Index rose 13.61% for the quarter. This was the best quarter for European equities since the third quarter of 2010. The market moved up strongly and quite smoothly in July, rising over 7% for the month. Then in August the market drifted broadly sideways to begin with, but then ended up in some profit taking in the second-half of the month, leading to a final decline of just over -1% for the month. In September the market rallied strongly all the way to the US Federal Reserve meeting, before moving slightly downwards, but September