Quarterly Market Update
Fourth Quarter 2014
Quarterly Capital Markets Review and Outlook
Projecting 2% GDP Growth in 2014
The final estimate for real GDP growth in 2Q14 was revised up to 4.6% from the initial estimate of 4.0%, marking the strongest pace since 4Q11 and enough to offset the 2.1% contraction of 1Q14. Although there are a growing list of global concerns, our economic activity models indicate that recent data is consistent with our baseline scenario of 2.0% GDP growth for the U.S. in 2014. Read more >
The Fed Prepares to Remove the Training Wheels
The Fed is preparing to exit the last of the quantitative easing programs on October 29 as economic data indicate that the economy can stand on its own two feet without large monthly infusions of liquidity. However, mounting concerns about GDP growth in the rest of the world combined with uncertainty about the strength of the U.S. recovery, have made strong domestic economic data even more important than it has been for some time. Read more >
Downward Bias Characterizes Third Quarter
Forward earning guidance for the balance of 2014 is strong. However, we are mindful that the continued slowdown in Europe could impact earnings going forward as many larger U.S. companies generate almost half of their sales overseas. Read more >
Fixed Income Outlook
Foreign Buying Suppressing U.S. Interest Rates/em>
Even though domestic GDP is expected to accelerate and eventually push U.S. yields higher, foreign purchases of U.S. debt, combined with below-target inflation are acting to suppress domestic rates. High interest rates in the U.S. compared to overseas, combined with the strengthening dollar, make U.S. bonds very attractive to foreign investors. Read more >
Q&A with BBVA Compass Managing Director of Portfolio Management, Gwynne Shackelford and BWS Investment Strategist, Anne-Joëlle Viguier-Galley
Increasingly apparent is the divergence of the pace of U.S. economic growth from the rest of the world. In this edition of BBVA Compass Market Outlook, Mses. Shackelford and Viguier-Galley examine global monetary policies and explore reasons behind some of the disappointing results. 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).