However, the real game-changer for equity investors was the decision by the European Central Bank (ECB) in the summer of 2012 to finally agree to launch its bond bazooka and offer to use its massive balance sheet to purchase government bonds from the southern Mediterranean block of countries in order to stop the region's debt contagion spreading any further. This policy decision, albeit belated, had bond bears running for cover and resulted in the subsequent dramatic fall in secondary market yields in the government bonds of all the Southern Med block countries. As a result, a significant amount of risk embedded in equity market valuations due to a potential break up of the eurozone was removed. Add to that the US Central Bank’s largesse of purchasing an aggregate $85bn (£53bn) of Treasuries and mortgage-backed securities a month as part of its ongoing QE3 bond buying programme, the consequence of which is to drive investors to higher risk and higher yielding assets including equities, and the back drop for global stock markets in the western world has been incredibly benign.
Not that equity markets move up in a straight line, they never do as bull markets are habitually punctuated by corrections some of which can be severe. But the key point to note is that the pull backs are buying opportunities unless of course you think the great bull market of 2009 to 2013 has now run its course. I don’t take that view which is why I have continued to produce numerous buy recommendations on shares all year and have used pull-backs in the watchlist of my companies as repeat buying opportunities - a strategy that has served us incredibly well.