All Posts Tagged: tapering

Top 10 investment signposts to watch for in 2014

Wade Balliet
Posted by Wade Balliet
Investment Strategy

The U.S. economy shows signs of an active sustainable recovery for the first time in six years, with steady growth anticipated as international markets continue to break through their slumps. Globally, the picture is mixed, as Europe transitions from recession to recovery, and emerging markets may continue to struggle as the countries attempt to address internal fiscal and monetary issues.

Closeup of pillars on exterior of Federal Reserve buildingThat’s the top-line takeaway from the 2014 investment commentary from the Investment Advisory & Management team (IA&M) of Bank of the West’s Wealth Management Group. The IA&M team leads portfolio management for the Bank’s affluent and high net worth clients.

Here is a breakdown of 10 specific areas of focus from the team’s 2014 outlook:

S&P earnings. 6 to 8 percent.
The team does not see the equity market in a bubble or overvalued as long as revenues and earnings continue to grow in 2014, with S&P earnings estimated to grow at 6 to 8.

U.S. equity market. Slowing growth.
Momentum in the U.S. equity market can continue if companies see improved top-line growth as a result of pent-up demand, signs that interest rates will eventually rise, diminished fiscal drag, and more balanced global growth.

EU equities. Poised for breakout.
As Europe transitions from recession to recovery, the EU region’s equities could be poised for an intermediate breakout if fiscal drag continues to dissipate and growth rates accelerate.

Global growth. Mixed performance.
Internationally, the team believes that global growth will continue to recover, but at a slower pace than investors expect. China is among the countries growing at or above 7% while Latin American countries are closer to 3%, and others like Brazil are facing recessionary pressures.

GDP. U.S. and Global.
Real Gross Domestic Product (GDP) is expected to rise from 1.6 percent in 2013 to 2.6 in 2014, driven by an increase in industrial production, business spending, gains in housing starts, steady consumer spending, and less fiscal drag. Global GDP growth may remain modest for several years; however, current valuations for the commodity market appear unsustainably low but will likely rise with global economic growth.

Emerging markets. Slow recovery.
Emerging markets may continue to struggle as the countries attempt to address internal fiscal and monetary issues, effectively reforming current policy from strictly export growth to one more aligned with domestic growth.

Fed challenges. Alleviating volatility.
With the start of the Fed tapering, expect increased interest rate volatility. A factor in alleviating volatility in the markets will be the Fed’s ability to guide the market in distinguishing between tapering and rate hikes as well as clearly articulating that tapering is not tightening.

Fixed Income. Attractive valuations.
High quality municipal bonds will perform relatively well as valuations remain attractive when compared to taxable securities, improving credit quality, and supply that remains below historical averages.

Commodities to rise. Opportunities in energy.
Current valuations for the commodity market appear unsustainably low but will likely rise with global economic growth. Recent energy infrastructure investments should perform well as they are exploited, providing energy-intensive industries with an advantage.

Capital spending. Boosting tech and industrial sectors.
In 2014, the rate of increase in capital spending could nearly double, which will be particularly positive for the technology and industrial sectors.

Read more about the Investment Advisory & Management report here, which includes an outlook for the equity, fixed income, and alternative investment classes.

 

The information set forth in this material is for informational purposes only and should not be construed as legal, tax, or investment advice. The information contained in this newsletter is not intended as an offer to purchase or sell any financial product, nor does the information constitute an expression of the Bank’s view as to whether a particular security or financial instrument is appropriate for you and meets your financial objectives. Past performance is not indicative of future results. Investors should seek the advice of a financial professional regarding the appropriateness of any investment or investment strategy mentioned in this material. All investments involve risk.

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U.S. Outlook: Encouraging signs of growth still evident

Scott Anderson
Chief Economist
jobless_1122

“Better than expected” is a phrase you will hear often about this October’s economic data. Is the U.S. economy on the cusp of a meaningful acceleration? Below is a brief summary of my weekly analysis, followed by a link to the full report, delivered on Nov. 22, 2013. (Note: This report covers two weeks; there […]

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Instant Analysis: October FOMC minutes

Scott Anderson
Chief Economist
Federal Reserve

Key observations: October FOMC minutes were not dovish enough for markets. Solid jobs reports could trigger tapering announcement in January. The minutes of the October FOMC meeting were not dovish enough for the markets to sustain their recent rally. Both stock and bonds sold off in the afternoon following the release of the minutes. The […]

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U.S. Outlook: A stronger October if you believe the PMIs

Scott Anderson
Chief Economist
jobs_numbers_110813

October’s Purchasing Manager Indexes (PMIs) and employment report are two big factors in the economy right now, and I discuss their influences in this week’s U.S. Outlook report. Below is a brief summary followed by a link to the full report, delivered on Nov. 8, 2013. Key observations: U.S. economic momentum may have outweighed the […]

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