Quarterly Market Update
Fourth Quarter 2013
Quarterly Capital Markets Review and Outlook
New Year Commands More Optimistic Economic Views
Clear improvement in economic data, including employment growth and confidence measures, encourage a brighter economic outlook. 2014 is shaping up to be relatively strong compared to 2013 as risks shift more to the upside and downside risk is diminished, particularly on the fiscal side. We forecast 2014 GDP growth of 2.5%. Read more >
Fed Announces Measured Exit
As the Fed tiptoes out of its stimulus stance, the economic expansion should become more organic in nature. Read more >
What a Change in the 10-Year Results
2013 equity market results seriously challenged the notion held by some investors at the end of 2010 that after having underperformed for a decade, stocks were no longer the assets of growth. We submit that 2014 is likely to be yet another year that stocks outperform fixed income and cash returns. Read more >
Fixed Income Outlook
Bond Market Marks New Era
We anticipate that the yield on the 10-year Treasury could rise to 3.5% by the end of 2014, but that the drift will be a slow one, carefully engineered by the Fed to promote bond price stability. Investors’ continued search for the yield and diversification afforded by bonds should keep credit spreads tight and also help to contain long rates. Read more >
Q&A with Chief Investment Officer, John Sawyer
In this edition of BBVA Compass Market Outlook, Chief Investment Officer John Sawyer urges investors to maintain a welldiversified portfolio of both stocks and bonds. Even after 2013’s run up, large-cap equities remain moderately priced, and bonds, as they demonstrated in 2013, can survive a range of modest performance to modest underperformance without significant valuation changes. 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).