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
"We're a cybersecurity firm that specializes in engineering security solutions both at the software and hardware level. Security cannot be an after-the-fact afterthought, which is what it's become," stated Richard Blech, Chief Executive Officer at Secure Channels, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
In this strange new world where more and more power is drawn from business technology, companies are effectively straddling two paths on the road to innovation and transformation into digital enterprises. The first path is the heritage trail – with “legacy” technology forming the background. Here, extant technologies are transformed by core IT teams to provide more API-driven approaches. Legacy systems can restrict companies that are transitioning into digital enterprises. To truly become a lead...
In IT, we sometimes coin terms for things before we know exactly what they are and how they’ll be used. The resulting terms may capture a common set of aspirations and goals – as “cloud” did broadly for on-demand, self-service, and flexible computing. But such a term can also lump together diverse and even competing practices, technologies, and priorities to the point where important distinctions are glossed over and lost.
Video experiences should be unique and exciting! But that doesn’t mean you need to patch all the pieces yourself. Users demand rich and engaging experiences and new ways to connect with you. But creating robust video applications at scale can be complicated, time-consuming and expensive. In his session at @ThingsExpo, Zohar Babin, Vice President of Platform, Ecosystem and Community at Kaltura, discussed how VPaaS enables you to move fast, creating scalable video experiences that reach your aud...
All clouds are not equal. To succeed in a DevOps context, organizations should plan to develop/deploy apps across a choice of on-premise and public clouds simultaneously depending on the business needs. This is where the concept of the Lean Cloud comes in - resting on the idea that you often need to relocate your app modules over their life cycles for both innovation and operational efficiency in the cloud. In his session at @DevOpsSummit at19th Cloud Expo, Valentin (Val) Bercovici, CTO of Soli...
"Once customers get a year into their IoT deployments, they start to realize that they may have been shortsighted in the ways they built out their deployment and the key thing I see a lot of people looking at is - how can I take equipment data, pull it back in an IoT solution and show it in a dashboard," stated Dave McCarthy, Director of Products at Bsquare Corporation, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
What happens when the different parts of a vehicle become smarter than the vehicle itself? As we move toward the era of smart everything, hundreds of entities in a vehicle that communicate with each other, the vehicle and external systems create a need for identity orchestration so that all entities work as a conglomerate. Much like an orchestra without a conductor, without the ability to secure, control, and connect the link between a vehicle’s head unit, devices, and systems and to manage the ...
An IoT product’s log files speak volumes about what’s happening with your products in the field, pinpointing current and potential issues, and enabling you to predict failures and save millions of dollars in inventory. But until recently, no one knew how to listen. In his session at @ThingsExpo, Dan Gettens, Chief Research Officer at OnProcess, discussed recent research by Massachusetts Institute of Technology and OnProcess Technology, where MIT created a new, breakthrough analytics model for ...
IoT is rapidly changing the way enterprises are using data to improve business decision-making. In order to derive business value, organizations must unlock insights from the data gathered and then act on these. In their session at @ThingsExpo, Eric Hoffman, Vice President at EastBanc Technologies, and Peter Shashkin, Head of Development Department at EastBanc Technologies, discussed how one organization leveraged IoT, cloud technology and data analysis to improve customer experiences and effici...
Everyone knows that truly innovative companies learn as they go along, pushing boundaries in response to market changes and demands. What's more of a mystery is how to balance innovation on a fresh platform built from scratch with the legacy tech stack, product suite and customers that continue to serve as the business' foundation. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, discussed why and how ReadyTalk diverted from healthy revenue and mor...
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...
You have great SaaS business app ideas. You want to turn your idea quickly into a functional and engaging proof of concept. You need to be able to modify it to meet customers' needs, and you need to deliver a complete and secure SaaS application. How could you achieve all the above and yet avoid unforeseen IT requirements that add unnecessary cost and complexity? You also want your app to be responsive in any device at any time. In his session at 19th Cloud Expo, Mark Allen, General Manager of...
The Internet of Things (IoT) promises to simplify and streamline our lives by automating routine tasks that distract us from our goals. This promise is based on the ubiquitous deployment of smart, connected devices that link everything from industrial control systems to automobiles to refrigerators. Unfortunately, comparatively few of the devices currently deployed have been developed with an eye toward security, and as the DDoS attacks of late October 2016 have demonstrated, this oversight can ...
"MathFreeOn.com is a line coding platform for engineers and scientists. When they want to solve an engineering problem and they have to use software - they have to pay a lot of money for licenses - but with MathFreeOn you don't have to pay a lot of money. Just go to our site and write the code and you can check the result right away," explained Simon Lee, CMO of MathFreeOn, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Cla...
In his session at 19th Cloud Expo, Claude Remillard, Principal Program Manager in Developer Division at Microsoft, contrasted how his team used config as code and immutable patterns for continuous delivery of microservices and apps to the cloud. He showed how the immutable patterns helps developers do away with most of the complexity of config as code-enabling scenarios such as rollback, zero downtime upgrades with far greater simplicity. He also demoed building immutable pipelines in the cloud ...