SAN FRANCISCO, Jan. 28, 2013 /PRNewswire/ -- As the debt ceiling debates approach in February, Bank of the West's Wealth Management Group today shared its investment perspective and market commentary for 2013 portfolios. The Wealth Management Group's Investment Advisory & Management team (IA&M), led by Don Silva and Wade Balliet, handles portfolio management for the Bank's affluent and high net worth clients.
"While actions taken by Congress at the end of 2012 will make the 2013 tax season a bit easier, we, along with the rest of the world, are watching whether a broad agreement to trim $4 trillion from the nation's debt over ten years can be achieved," said Balliet. The team is positioning clients' portfolios accordingly, by removing some volatility while continuing to position for growth with a slight overweight in the equity asset class.
According to the team, following are four of the major themes guiding its outlook for the coming year:
1. The U.S. Continues its Domination, but Not for Long
The U.S. market will continue to outperform developed markets in the early months of 2013, yet the expectation of 2 to 2.5% GDP growth may not be enough to keep U.S. equities in the lead. As the European recovery begins, the team projects Europe will exit the current recession in late Q2 or Q3 of 2013. While the team does not expect Europe to have a significant spike in growth, they do expect the pace of economic output will turn positive in the second half of the year and that the opportunity for a recovery in both economic growth and earnings may push the developed international markets asset class ahead of the U.S. market from a return standpoint in 2013.
2. A Preference for China & Emerging Markets
According to the IA&M team, China's growth rate may be bottoming and will likely rebound in 2013. Both domestic growth and exports should see positive gains as the year unfolds. Infrastructure spending and housing gains should generate enough momentum to sustain growth within the country's borders. China should also be the benefactor of economic improvements in the U.S., Japan and Europe, which can be expected to provide some accelerant to the export story. The combination of continued strong domestic growth and a recovery in export growth should help the sentiment improve with regards to China, and this should also serve as a catalyst to renewed interest in the emerging market class as a whole.
3. The Debt Ceiling & Possible Subsequent Downgrade Cause Concern, Uncertainty and Volatility
While the Treasury Department has said it will undertake "extraordinary measures" to raise cash in order to meet government obligations, the team believes these efforts will not solve the extended need to raise the debt ceiling for both 2013 and 2014. According to the team, the debt ceiling debate will bring to the forefront the United States credit quality and willingness or ability to service their debt.
4. A Favorable Outlook on International Fixed Income
The IA&M team is moving toward international developed sovereign and corporate debt and adding to emerging market debt in lieu of current domestic debt holdings. The team also trimmed taxable municipal exposure in favor of tax-exempt municipal bonds. According to the team, dynamic diversification is paramount to investor success within debt market investing, as the distortion between asset classes continues to evolve and real yield is harder and harder to find.
"In summary, taking some profits on U.S. equities and being extremely tactical should provide a smoother return pattern during these times of policy uncertainty," said Balliet. "Longer term, we believe international stocks and debt may have the opportunity to outperform the U.S. market in the second half of 2013. Our preference would be to favor emerging market economies, particularly China, as they should draw more investor attention in the new year," said Balliet.
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 $354 billion (€265 billion) in assets under management globally as of September 30, 2012.
About Bank of the West:
Founded in 1874, $63 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 700 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.
All investments involve risk. Investors should seek the advice of a financial professional regarding the appropriateness of any securities or strategies discussed. Foreign securities, especially emerging markets, will involve additional risks including exchange rate fluctuations, social and political instability, less liquidity, greater volatility and less regulation. Frontier markets have lower market capitalization and liquidity than more developed emerging markets. Treasuries are subject to interest rate risk, call risk, and inflation risk. An investment in corporate bonds is subject to a variety of risks including credit and default risk, market risk, event risk, call risk, interest rate risk, foreign risk, and sector risk. Mortgage backed securities are subject to prepayment risk. Municipal bonds are subject to a number of risks such as interest rate risk, call risk, inflation risk, credit and default risk, and tax risks.
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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.
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SOURCE Bank of the West