Welcome!

News Feed Item

Bank of the West Wealth Management Expects Equities to Dominate in 2014, Outpacing Bonds and Alternatives

SAN FRANCISCO, Feb. 4, 2014 /PRNewswire/ -- As the economy shows positive signs of an active recovery for the first time in six years and all eyes are on the Federal Reserve and Congress, the Investment Advisory & Management team (IA&M) of Bank of the West's Wealth Management Group shared its investment commentary for 2014. The IA&M team leads portfolio management for the Bank's affluent and high net worth clients.

(Logo:  http://photos.prnewswire.com/prnh/20120328/SF78222LOGO-b)

The expectation is that the U.S. economy will continue its steady growth while international markets, specifically Europe, continue to break through their slumps. Meanwhile, the spotlight of pessimism continues to center on emerging market countries, especially China, despite above average growth versus developed markets.

The IA&M outlined its outlook for the equity, fixed income and alternative investment classes, in addition to potential disruptors which investors will need to navigate in 2014.

Equity Play

The IA&M team expects that global equity markets will outpace bonds and alternatives in 2014. Momentum in the U.S. equity market can continue if companies see improved top-line growth as a result of pent-up demand, realization that interest rates will eventually rise, diminished fiscal drag and more balanced global growth.  The team does not see the equity market in a bubble or overvalued as long as revenues and earnings continue to grow, with S&P earnings estimated to grow at 6-8 percent in 2014.

Additionally, the rate of increase in capital spending could nearly double in 2014. Gains in capital spending could positively impact companies in the technology and industrial sectors. Companies will actually begin deploying cash once their managements have enough confidence that a global economic rebound will be sustainable, and after 6 years this seems to gradually be coming to fruition.

U.S. equities are on solid footing, but will have more difficulty extending gains beyond earnings growth rates due to being further along in the recovery cycle than other major countries.  Internationally, the team favors developed international equity market prospects; which are positioned for continued improvement 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.

"The global growth forecasted needs to materialize for equity markets to continue to experience gains at a strong pace," said Wade Balliet, CFA and co-head of the IA&M team.  "Europe is the key component of the global growth story this year as the global economy needs stronger demand out of the region to realize the more optimistic predictions for growth."

Overseas data have recently improved, particularly in Europe. The European Central Bank (ECB) and the Bank of England are expected to continue to be accommodative in 2014. Europe may see more mergers and acquisition activities but challenges may still lay ahead for the region, with bank asset quality reviews and stress tests, the debate on a banking union, the ongoing struggle of austerity versus growth and the possibility of the extension of the ECB's Long Term Refinancing Operation (LTRO). Avoiding disinflation will also be a challenge for the ECB in 2014.

The real danger and opportunity lies in emerging market countries, where a divergence has grown:  some, like China, are growing at or above 7% while others like Latin America are closer to 3%, and still others like Brazil are facing recessionary pressures.  While better than average valuations exist in some of these markets the IA&M team thinks it is a bit too soon to start overweighting tactical positions due to cheapness alone.  Timing will be paramount as momentum could continue to carry these markets downward, even as global growth accelerates.

Fixed Income

The team believes 2014 will be similar to 2013 in that it will be a year of political debates and Fed action domestically, and a slowly improving international economy. High quality municipal bonds will perform relatively well as valuations remain attractive when compared to taxable securities, improving credit quality, and supply remains below historical averages.

Over the shorter term, the team continues to advocate spread or credit products, allocations to credit-sensitive sectors such as high yield, floating rate notes, as well as an underweight to duration. Foreign government bonds will likely outperform Treasuries as supply shifts in the market due to tapering, and the team maintains an underweight recommendation in Treasuries. 

"This past year proved to be volatile for bonds, but we continue to expect yields to normalize over the next few years from the artificially suppressed levels created by the FOMC," said Cory Gebel, CFA and Senior Portfolio Manager.  

Internationally, the team believes that global growth will continue to recover, but at a slower pace than investors expect. 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.

Alternative Strategies

With the start of the Fed tapering, the team expects increased interest rate volatility which will benefit alternative strategies that are able to take advantage of that volatility. The team believes 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.  Recent energy infrastructure investments should perform well as they are exploited, providing energy intensive industries with an advantage.

Fed Activity

The team predicts a pick-up in real Gross Domestic Product (GDP) from 1.6 percent in 2013 to 2.6 in 2014. This increase is mainly attributed to an expected increase in industrial production, business spending, gains in housing starts and spending from an ever-resilient American consumer, and less fiscal drag.

Although the margin by which the Fed is trimming bond purchases – from $85 billion to $75 billion – is smaller than expected, it signals the Fed's confidence in the underlying strength of the U.S. economy. A key factor in the Fed's success in alleviating volatility in the markets will be in guiding the market to distinguish between tapering and rate hikes.  Another challenge will be clearly articulating that tapering is not tightening.

"Due to tapering, mortgages and Treasuries will likely underperform the broader market during the tapering process," said Ben Baier, Senior Portfolio Manager.  "Housing may face some headwinds from not only the predicted pick-up in rates, but also from tighter government regulations on lending that are set to take effect in January 2014."

The Wealth Management Investment Advisory & Management group at Bank of the West tracks and updates these investment themes throughout the year and applies its recommendations to the portfolios it manages for fiduciary clients.   

Bank of the West Wealth Management provides wealth planning consulting, investment management*, personal banking, and trust services. The group is part of BNP Paribas' global wealth management business of more than 6,000 professionals in 30 countries worldwide with over $10 billion** in assets under management in the United States and $381 billion (€279 billion) in assets under management globally as of September 30, 2013.

About Bank of the West:

Founded in 1874, $64 billion-asset Bank of the West (www.bankofthewest.com), member FDIC and equal housing lender, offers a wide range of personal, commercial, wealth management and international banking services. The bank operates more than 600 retail and commercial banking locations in 19 Western and Midwestern states. Bank of the West is a subsidiary of BNP Paribas, which has a presence in 80 countries with nearly 200,000 employees.

*Securities and variable annuities are offered through BancWest Investment Services, Inc., a registered broker/dealer, Member FINRA/SIPC. Financial Advisors are registered representatives of BancWest Investment Services, Inc. Fixed annuities/insurance products are offered through BancWest Insurance Agency in California (License # 0C52321) and through BancWest Insurance Agency in Utah, and through BancWest Investment Services in AZ, CO, IA, ID, KS, MN, MO, ND, NE, NM, NV, OK, OR, SD, WA, WI, WY, HI, GUAM and CNMI. Bank of the West and its various affiliates and subsidiaries are not tax or legal advisors.

Bank of the West Wealth Management provides financial products and services through Bank of the West and its various affiliates and subsidiaries. 

BancWest Investment Services is a wholly owned subsidiary of Bank of the West and a part of the Wealth Management Group. BancWest Corporation is the holding company for Bank of the West. BancWest Corporation is a wholly owned subsidiary of BNP Paribas.

Investment and Insurance Products are:

NOT FDIC INSURED • NOT BANK GUARANTEED • MAY LOSE VALUE • NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

** Including assets under supervision at BancWest Investment Services

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.

SOURCE Bank of the West Wealth Management

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Companies can harness IoT and predictive analytics to sustain business continuity; predict and manage site performance during emergencies; minimize expensive reactive maintenance; and forecast equipment and maintenance budgets and expenditures. Providing cost-effective, uninterrupted service is challenging, particularly for organizations with geographically dispersed operations.
SYS-CON Events announced today that Avere Systems, a leading provider of enterprise storage for the hybrid cloud, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Avere delivers a more modern architectural approach to storage that doesn’t require the overprovisioning of storage capacity to achieve performance, overspending on expensive storage media for inactive data or the overbuilding of data centers ...
As someone who has been dedicated to automation and Application Release Automation (ARA) technology for almost six years now, one of the most common questions I get asked regards Platform-as-a-Service (PaaS). Specifically, people want to know whether release automation is still needed when a PaaS is in place, and why. Isn't that what a PaaS provides? A solution to the deployment and runtime challenges of an application? Why would anyone using a PaaS then need an automation engine with workflow ...
Recognizing the need to identify and validate information security professionals’ competency in securing cloud services, the two leading membership organizations focused on cloud and information security, the Cloud Security Alliance (CSA) and (ISC)^2, joined together to develop an international cloud security credential that reflects the most current and comprehensive best practices for securing and optimizing cloud computing environments.
With the Apple Watch making its way onto wrists all over the world, it’s only a matter of time before it becomes a staple in the workplace. In fact, Forrester reported that 68 percent of technology and business decision-makers characterize wearables as a top priority for 2015. Recognizing their business value early on, FinancialForce.com was the first to bring ERP to wearables, helping streamline communication across front and back office functions. In his session at @ThingsExpo, Kevin Roberts...
As enterprises work to take advantage of Big Data technologies, they frequently become distracted by product-level decisions. In most new Big Data builds this approach is completely counter-productive: it presupposes tools that may not be a fit for development teams, forces IT to take on the burden of evaluating and maintaining unfamiliar technology, and represents a major up-front expense. In his session at @BigDataExpo at @ThingsExpo, Andrew Warfield, CTO and Co-Founder of Coho Data, will dis...
SYS-CON Events announced today that iDevices®, the preeminent brand in the connected home industry, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. iDevices, the preeminent brand in the connected home industry, has a growing line of HomeKit-enabled products available at the largest retailers worldwide. Through the “Designed with iDevices” co-development program and its custom-built IoT Cloud Infrastruc...
Sensors and effectors of IoT are solving problems in new ways, but small businesses have been slow to join the quantified world. They’ll need information from IoT using applications as varied as the businesses themselves. In his session at @ThingsExpo, Roger Meike, Distinguished Engineer, Director of Technology Innovation at Intuit, showed how IoT manufacturers can use open standards, public APIs and custom apps to enable the Quantified Small Business. He used a Raspberry Pi to connect sensors...
Eighty percent of a data scientist’s time is spent gathering and cleaning up data, and 80% of all data is unstructured and almost never analyzed. Cognitive computing, in combination with Big Data, is changing the equation by creating data reservoirs and using natural language processing to enable analysis of unstructured data sources. This is impacting every aspect of the analytics profession from how data is mined (and by whom) to how it is delivered. This is not some futuristic vision: it's ha...
Silver Spring Networks, Inc. (NYSE: SSNI) extended its Internet of Things technology platform with performance enhancements to Gen5 – its fifth generation critical infrastructure networking platform. Already delivering nearly 23 million devices on five continents as one of the leading networking providers in the market, Silver Spring announced it is doubling the maximum speed of its Gen5 network to up to 2.4 Mbps, increasing computational performance by 10x, supporting simultaneous mesh communic...
Advances in technology and ubiquitous connectivity have made the utilization of a dispersed workforce more common. Whether that remote team is located across the street or country, management styles/ approaches will have to be adjusted to accommodate this new dynamic. In his session at 17th Cloud Expo, Sagi Brody, Chief Technology Officer at Webair Internet Development Inc., focused on the challenges of managing remote teams, providing real-world examples that demonstrate what works and what do...
CIOs and those charged with running IT Operations are challenged to deliver secure, audited, and reliable compute environments for the applications and data for the business. Behind the scenes these tasks are often accomplished by following onerous time-consuming processes and often the management of these environments and processes will be outsourced to multiple IT service providers. In addition, the division of work is often siloed into traditional "towers" that are not well integrated for cro...
The principles behind DevOps are not new - for decades people have been automating system administration and decreasing the time to deploy apps and perform other management tasks. However, only recently did we see the tools and the will necessary to share the benefits and power of automation with a wider circle of people. In his session at DevOps Summit, Bernard Sanders, Chief Technology Officer at CloudBolt Software, explored the latest tools including Puppet, Chef, Docker, and CMPs needed to...
Let’s face it, embracing new storage technologies, capabilities and upgrading to new hardware often adds complexity and increases costs. In his session at 18th Cloud Expo, Seth Oxenhorn, Vice President of Business Development & Alliances at FalconStor, will discuss how a truly heterogeneous software-defined storage approach can add value to legacy platforms and heterogeneous environments. The result reduces complexity, significantly lowers cost, and provides IT organizations with improved effi...
The cloud promises new levels of agility and cost-savings for Big Data, data warehousing and analytics. But it’s challenging to understand all the options – from IaaS and PaaS to newer services like HaaS (Hadoop as a Service) and BDaaS (Big Data as a Service). In her session at @BigDataExpo at @ThingsExpo, Hannah Smalltree, a director at Cazena, will provide an educational overview of emerging “as-a-service” options for Big Data in the cloud. This is critical background for IT and data profes...