Robust economic recovery on both sides of the Atlantic, led by the United States and Britain, will provide the backcloth to the world economy and financial markets in 2014.
The eurozone will continue to be constrained by fiscal adjustment in the periphery, a weak economic outlook in France and the failure to fully confront the underlying weaknesses of the banking system. There is a major risk in Europe of deflation, falling wages and prices, unless there is dramatic intervention.
Israel will continue to perform strongly, despite the problems of its biggest market the eurozone, supported by rising levels of natural gas production. The big unknown for Israel is the outcome of the peace talks with the Palestinians - largely conducted behind closed doors - that potentially could provide a boost to confidence if they are successfully concluded.
The upturn in the US and Britain has largely been built on three pillars: reform and recapitalisation of the banking systems, artificially low interest rates (in the UK bank rate has been held at 0.5 per cent since June 2009) and quantitative easing, the printing of money. In the US the Federal Reserve System, headed by Ben Bernanke, has begun the process of tapering - reducing the volumes of quantitative easing (QE). Last month it announced that it will ease down the quantity of easing from $85 billion a month to $75 billion a month. The new chairman of the Fed Janet Yellen, the first woman to hold the post, is expected to continue the process when she takes over in February.
The markets have so far been impressed that the Fed has chosen a gradualist course rather than a sudden withdrawal of QE and has also chosen to change its forward guidance in a way that is likely to postpone a rise in US interest rates from record low levels.
Job creation and business confidence — UK economy continues to surprise
In Britain the economy will continue to surprise on the upside with job creation surging and business confidence high. Exports, that have disappointed, should start to pick-up. It now looks increasingly likely that the Bank of England will hit its seven per cent target rate of unemployment much more quickly than expected when it was set in August last year.
The Bank first forecast that it would take until 2016 for the jobless rate to be reduced to that level - but it now looks as if it could be achieved sometime this year.
Bank of England Governor Mark Carney already is hinting at a change in guidance that would take into account other factors such as rising living standards.
Labour leader Ed Miliband has made the cost of living and falling living standards the core of his attack on the coalition government. However, a combination of falling inflation and gradually rising private sector incomes could render that narrative obsolete by the end of 2014.
This year the London Stock Exchange could see record levels of initial public offerings, following on from the Royal Mail and Merlin Entertainment last year. The government will be anxious to sell off as much of the remaining taxpayer stake in Lloyds Banking Group as it can get away following the successful placement of six per cent of the shares.
Lloyds will also want to press ahead with the disposal of 632 branches separated and trading under the TSB brand as required by the European Commission. Similarly, Royal Bank of Scotland must dispose of its Williams and Glyn's branches, while, it will begin the process of selling of its US network Citizens, the fifth largest branch bank in the US.
On the retail front at least two discount chains, that expanded during the period of crisis, Poundland and B&M - the later chaired by former Tesco boss Sir Terry Leahy - are scheduled to seek public floats. Among existing retail chains much focus will be on leadership at Marks & Spencer and Tesco. Marc Bolland at M&S will find himself under early pressure following the failure of the Autumn womenswear range to turn the company's fortunes. The company's international expansion and transfer to a new internet platform of its own may come too late for shareholders.
Tesco chief executive Philip Clarke may also find himself under pressure unless same store sales at home and general sales and profits overseas start to strengthen again.
Europe will remain a drag on UK growth (it is the UK's biggest export market still) and global output in 2014. Mario Draghi, the president of the European Central Bank, may feel the need to step up intervention - through some kind of QE - if as expected the region tips into Japanese style deflation when prices, wages, savings and asset values are dragged down.
Potentially that could be the biggest threat to global output in 2014.
