Fourth Quarter 2016
Quarterly Capital Markets Review and Outlook
Projecting 1.8% GDP in 2016
The FOMC September economic projections reveal a lower Fed funds rate path together with lower long-term GDP growth expectation due to global risk-off sentiment, low inflation risk, moderate growth expectations, and the condensed duration risk environment. Read more >
Stalled U.S. Economic Growth Will Continue to Perplex
Despite massive monetary stimulus, the economy has grown at only 2.1% annually on average since the U.S. recovery began in 2009, the slowest pace of any recovery in the post-World War II era. Theories abound, but whatever the culprit, whether a temporary phase or a fundamental change in global growth dynamics, businesses and consumers are being forced to adapt. Read more >
Market Conditions Best Addressed with Active Management
We anticipate a tempering of defensive stock performance as profit taking commences and a rotation into small-cap stocks emerges. We also continue to emphasize the distinction between high market valuations versus high company valuations. We are finding opportunities in consumer discretionary, financials, and other areas that have yet to participate in the rally. Read more >
Fixed Income Outlook
Practicality May Drive Next Fed Rate Hike
The low interest rate environment has been very harmful to some, including financial institutions, insurance companies, senior citizens, and savers. That might be the reason the Fed finally hikes rates– out of a practical sense of helping a few economic and demographic sectors in hopes that improvement there stimulates broader growth. Read more >
Q&A with Gwynne Shackelford, Chief Investment Strategist of BBVA Compass Global Wealth, and BWS Investment Strategist, Anne-Joëlle Viguier-Galley
In this edition of the BBVA Compass Market Outlook, Mses. Shackelford and Viguier-Galley take a look at the continuing reach for yield and the possible ramifications as the Fed is poised to increase interest rates. 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).