Quarterly Market Update
First Quarter 2015
Quarterly Capital Markets Review and Outlook
Projecting 2.5% GDP Growth in 2015
Employment and inflation are moving in opposite directions, creating a balancing act between an upward revision to 2015 growth and a downward shift in inflation expectations. Our economic activity models indicate that recent data is consistent with a baseline scenario of 2.5% GDP growth for the U.S. in 2015, up slightly from 2014. Read more >
U.S. Economic Growth Achieves Traction
We see the pattern of stronger economic data continuing in 2015. The nice tailwind provided by lower oil prices could increase consumer discretionary spending. However, the U.S. dollar will likely continue to strengthen on the heels of higher domestic rates, perhaps weakening the export sector of the economy. Read more >
Corporate Earnings Outlook Remains Positive
Earnings growth should be the key to another year of positive performance for the U.S. equity market in 2015. As we expect the U.S. economy to continue to gain traction, revenues and earnings should follow suit, allowing equity prices to maintain their upward trend. While the bull market is likely to continue, it may do so at a more subdued pace. Read more >
Fixed Income Outlook
Risk Exposure on the Rise
We do not expect 2015 to be a repeat of 2014 given that yields are so historically low. The 1-10 Year U.S. Treasury Index has the longest duration and lowest overall coupon rate it has ever had. As a result, the Treasury market has more potential downside price volatility than we have ever seen, and investors could easily experience some bond market losses in 2015 if rates do indeed go up. Read more >
Q&A with Gwynne Shackelford, BBVA Compass Managing Director of Portfolio Management, and BBVA Wealth Solutions, Inc. (BWS) Investment Strategist, Anne- Joëlle Viguier-Galley
Supply Glut & Lackluster Demand Push Oil Prices Down
In this edition of BBVA Compass Market Outlook, Mses. Shackelford and Viguier-Galley examine the dynamics behind the 2014 oil price plunge and the anticipated impact on consumers, companies, and markets in 2015. Read more >
BBVA Compass is the trade name for Compass Bank, which is a member of the BBVA Group. Securities products are NOT deposits, are NOT FDIC insured, and are NOT bank guaranteed. May LOSE value, are NOT insured by any federal government agency.
This material contains forward looking statements and projections. There are no guarantees that these results will be achieved.
Investing involves risk including the potential loss of principal. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.
Indexes are unmanaged and investors are not able to invest directly into any index.
International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.
Investments in stocks of small companies involve additional risks. Smaller companies typically have a higher risk of failure, and are not as well established as larger blue-chip companies. Historically, smaller-company stocks have experienced a greater degree of market volatility than the overall market average.
Equity investments tend to be volatile and do not involve the guarantees associated with holding a bond to maturity.
In general, the bond market is volatile as prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
The investor should note that vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. The investor should be aware of the possible higher level of volatility, and increased risk of default.
Municipal bond offerings are subject to availability and change in price. If sold prior to maturity, municipal bonds may be subject to market and interest risk. An issuer may default on payment of the principal or interest of a bond. Bond values will decline as interest rates rise. Depending upon the municipal bond offered, alternative minimum tax and state/local taxes could apply.
The price of commodities is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable international monetary and political policies. The market for commodities is widely unregulated and concentrated investing may lead to higher price volatility.
Investments in real estate have various risks including possible lack of liquidity and devaluation based on adverse economic and regulatory changes.
Other Sources: Bloomberg; California.gov; Russell.com; First page index returns are calculated on a total return basis using the following indexes: S&P 500 (SPX), MSCI World (MXWO), MSCI Emerging Markets (MXEF), Bloomberg 7-10 Year U.S. Treasury Index (USG4TR), Morningstar U.S. Agency Bond TR Index (MSBIUATR), Municipal Bond Buyer 40 Index (BBMIRNEW), Credit Suisse High Yield Index (CSHY), MSCI U.S. REIT Index (RMZ Index).