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.

The second quarter has seen a significant political shift within India with Modi coming to power. Investors have built conviction and confidence in anticipation of reforms which are expected to benefit the Indian economy. For the quarter as a whole Indian equity markets, as measured by the MSCI India Index, rose by 12.67%. Market volatility was substantial during the quarter, with markets falling by -1.11% in April, which was before the election. Then in May markets surged on the back of the election news, gaining 9.58%, before progressing at a more modest pace in June with a rise of 3.97%. Market volatility should not be so extreme going forward, but there is the potential for some of the froth of overly optimistic expectations in certain segments of the market to normalise.

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. World equity markets as measured by the MSCI World (Developed Markets) Index rose 8.18% for the quarter. This was the best quarter for equities since the first quarter of 2012, and the second best since the end of 2010. However, the Indian market, as an emerging market performed quite differently, not least because of some of the deficit problems the country faces. For the quarter the MSCI India Index declined over -5%.

However, this covers the intra-quarter market performance which saw the market decline in July by almost -3%, before falling almost -11% in August, and then rallying more than 9% in September. Some of these market movements were exacerbated by the movement in the Indian rupee, which was weak over the quarter.