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
SYS-CON Events announced today that Massive Networks will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Massive Networks mission is simple. To help your business operate seamlessly with fast, reliable, and secure internet and network solutions. Improve your customer's experience with outstanding connections to your cloud.
DevOps is under attack because developers don’t want to mess with infrastructure. They will happily own their code into production, but want to use platforms instead of raw automation. That’s changing the landscape that we understand as DevOps with both architecture concepts (CloudNative) and process redefinition (SRE). Rob Hirschfeld’s recent work in Kubernetes operations has led to the conclusion that containers and related platforms have changed the way we should be thinking about DevOps and...
SYS-CON Events announced today that CAST Software will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CAST was founded more than 25 years ago to make the invisible visible. Built around the idea that even the best analytics on the market still leave blind spots for technical teams looking to deliver better software and prevent outages, CAST provides the software intelligence that matter ...
Docker containers have brought great opportunities to shorten the deployment process through continuous integration and the delivery of applications and microservices. This applies equally to enterprise data centers as well as the cloud. In his session at 20th Cloud Expo, Jari Kolehmainen, founder and CTO of Kontena, discussed solutions and benefits of a deeply integrated deployment pipeline using technologies such as container management platforms, Docker containers, and the drone.io Cl tool. H...
Given the popularity of the containers, further investment in the telco/cable industry is needed to transition existing VM-based solutions to containerized cloud native deployments. The networking architecture of the solution isolates the network traffic into different network planes (e.g., management, control, and media). This naturally makes support for multiple interfaces in container orchestration engines an indispensable requirement.
Everything run by electricity will eventually be connected to the Internet. Get ahead of the Internet of Things revolution and join Akvelon expert and IoT industry leader, Sergey Grebnov, in his session at @ThingsExpo, for an educational dive into the world of managing your home, workplace and all the devices they contain with the power of machine-based AI and intelligent Bot services for a completely streamlined experience.
Because IoT devices are deployed in mission-critical environments more than ever before, it’s increasingly imperative they be truly smart. IoT sensors simply stockpiling data isn’t useful. IoT must be artificially and naturally intelligent in order to provide more value In his session at @ThingsExpo, John Crupi, Vice President and Engineering System Architect at Greenwave Systems, will discuss how IoT artificial intelligence (AI) can be carried out via edge analytics and machine learning techn...
As businesses adopt functionalities in cloud computing, it’s imperative that IT operations consistently ensure cloud systems work correctly – all of the time, and to their best capabilities. In his session at @BigDataExpo, Bernd Harzog, CEO and founder of OpsDataStore, presented an industry answer to the common question, “Are you running IT operations as efficiently and as cost effectively as you need to?” He then expounded on the industry issues he frequently came up against as an analyst, and ...
SYS-CON Events announced today that Datera, that offers a radically new data management architecture, has been named "Exhibitor" of SYS-CON's 21st International Cloud Expo ®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Datera is transforming the traditional datacenter model through modern cloud simplicity. The technology industry is at another major inflection point. The rise of mobile, the Internet of Things, data storage and Big...
FinTechs use the cloud to operate at the speed and scale of digital financial activity, but are often hindered by the complexity of managing security and compliance in the cloud. In his session at 20th Cloud Expo, Sesh Murthy, co-founder and CTO of Cloud Raxak, showed how proactive and automated cloud security enables FinTechs to leverage the cloud to achieve their business goals. Through business-driven cloud security, FinTechs can speed time-to-market, diminish risk and costs, maintain continu...
In his session at @ThingsExpo, Arvind Radhakrishnen discussed how IoT offers new business models in banking and financial services organizations with the capability to revolutionize products, payments, channels, business processes and asset management built on strong architectural foundation. The following topics were covered: How IoT stands to impact various business parameters including customer experience, cost and risk management within BFS organizations.
As more and more companies are making the shift from on-premises to public cloud, the standard approach to DevOps is evolving. From encryption, compliance and regulations like GDPR, security in the cloud has become a hot topic. Many DevOps-focused companies have hired dedicated staff to fulfill these requirements, often creating further siloes, complexity and cost. This session aims to highlight existing DevOps cultural approaches, tooling and how security can be wrapped in every facet of the bu...
SYS-CON Events announced today that CA Technologies has been named "Platinum Sponsor" of SYS-CON's 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business - from apparel to energy - is being rewritten by software. From planning to development to management to security, CA creates software that fuels transformation for companies in the applic...
SYS-CON Events announced today that Pulzze Systems will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Pulzze Systems Inc, provides the software product "The Interactor" that uniquely simplifies building IoT, Web and Smart Enterprise Solutions. It is a Silicon Valley startup funded by US government agencies, NSF and DHS to bring innovative solutions to market.
As many know, the first generation of Cloud Management Platform (CMP) solutions were designed for managing virtual infrastructure (IaaS) and traditional applications. But that’s no longer enough to satisfy evolving and complex business requirements. In his session at 21st Cloud Expo, Scott Davis, Embotics CTO, will explore how next-generation CMPs ensure organizations can manage cloud-native and microservice-based application architectures, while also facilitating agile DevOps methodology. He wi...