US stocks were set to close 2013 at record levels, with world equity markets close to six-year peaks, while benchmark bond yields were poised for their first annual rise since 2009.
Ultra-easy monetary policies and an improving economic outlook worldwide led to a stellar year for stocks.
Equity strategists see the gains continuing into 2014 as economic growth improves even as the Federal Reserve steadily trims its bond-buying stimulus.
“Things still look pretty solid at the end of 2013, (and) 2014 will be a better year with less fiscal drag,” said Gus Faucher, senior economist at PNC Financial Services.
“The other thing is a better global economy. Exports will be better. Europe is coming out of recession. Growth in Asia is expected to re-accelerate.”
Wall Street was on track for its best year since 1997 with a 29 per cent gain. More than 450 of the stocks in the S&P 500 are set to end the year higher, the most since S&P started collecting that data in 1980.
Japan’s Nikkei ended the year up 56.7 per cent and European shares gained 16 per cent.
The FTSE 100 Index finished at 6749.1 on the last day of December trading, more than 800 ahead of its level of 5897.8 at the end of 2012.
Polls show that European stocks are expected to hit new highs in 2014, while Chinese, US and other major stock markets are also seen posting solid gains.
By contrast, the Barclays US Aggregate Index of investment-grade bonds is on track for its worst year since 1994, as interest rates rose in anticipation of reduced Fed stimulus and higher-yielding stocks attracted more investment flows.
Assets favoured by investors in economic downturns took a beating in 2013, with falling prices driving top-rated US and German bond yields to near their highest levels in around two years and gold limping toward its worst annual performance in three decades, losing more than 27 per cent.
The yield on the US 10-year Treasury note, which sets the standard for global borrowing costs, has risen to almost three per cent from 1.75 per cent at the start of the year, but is seen rising to only 3.35 per cent in 2014.
MSCI’s all-country world equity index has gained 20 per cent this year.
Emerging markets have been a noted exception to the rally in equities with fears that cuts in global monetary stimulus could expose economic imbalances as funds return to the rich world.