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"The year that has just passed was one that managed to confound most expectations.

It would have been a bold strategist who this time last year, forecast the oil price to halve from $112 per barrel. Yet today, a barrel costs $58.

Similarly, no one was looking for a significant fall in yields in quality government bonds. There was an almost universal prediction for a gentle rise through 2014; yet the UK 10 year gilt has fallen from a yield of 3% to back under 2%. The story is the same in the US, and Germany has seen even bigger declines due to low inflation in the Eurozone.

Politics and geopolitics are always hard to predict, but a few of the headlines have been even more outside the box than usual: Russia annexing Crimea; the closeness of the Scottish Referendum vote in the UK; the US recognising Cuba once more; the rise of ISIS in the Middle East...A year like 2014 only serves to illustrate that specific events are very rarely foreseeable, and their impact on financial markets even less so.

Nevertheless, attempting to identify broad trends in the direction of markets and economies is not a pointless exercise. In the attached note we’ll paint a broad roadmap for the near future, as we see it currently with our “strategic” hat on. Then as investment managers, we can act much as a sat-nav does, adjusting the route as new facts emerge about traffic, tolls and speed cameras."

Seven Investment Management (7IM)

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