Kentucky wealth managers see a solidly improving economy for 2014, but with definite challenges for investors seeking specific sectors to place their assets. Expectations are that ongoing improvement in overall employment levels and in household wealth will strengthen overall consumer spending to produce the virtuous economic growth cycle everyone has been waiting five years to see. However, ongoing change and realignment of sectors from the micro to the macro still must be accomplished.
For example, China is in the midst of broadening its economy away from a reliance on manufacturing. And there is some sentiment that the doubling of the equities market since its 2009 nadir, including 30-plus percent growth in 2012, suggest a correction in 2014 or some sort of cooling. An improving economy will mean rising interest rates also factor into investment plans, complicating management of assets.
“Following a dramatic recovery from the market lows of 2008, and a very strong 2013 market, investment advisors should experience a good business climate in 2014. While it is not anticipated that market returns will be as strong this year as last, decent U.S. business conditions – although likely with the overhang of continued relatively slow growth – should lead to modest gains in markets and advisor revenues and operating profits.”
Todd P. Lowe, CFA, President
“As an actuary I manage risk, and today’s economy is teeming with it. Savers and investors face three big challenges in 2014. First, interest rates are expected to stay low, making it hard to find attractive returns without taking on a lot of risk. Second, while I expect we’ll have a modest year of market growth, it’s becoming clear the market is heading toward a correction in the near future. And third, after various tax increases over the past few years, the tax climate remains a question mark for savers and investors alike. Together, it’s a lot of risk to manage.”
Martin H. Ruby, FSA, CEO
Stonewood Financial Solutions
“The U.S. and global economy will continue to expand and pick up steam in 2014. We continue to see evidence of an increase in sales of cars and houses, and companies gearing up to meet growing demand are increasing capital expenditures. This corporate investment and consumer spending appears to be set to drive the next phase of stronger economic activity. We see an environment of low inflation, low but rising rates and a pickup in economic activity as a “sweet spot” for equities and would use any sort of correction as an opportunity to selectively add positions to portfolios.”
Travis Musgrave, Wealth Management Advisor
“The increasingly uncertain path for emerging markets in 2014 will be the key variable in what most likely will be single-digit global equity returns and global interest rates that will be lower than they otherwise would be this coming year. Five emerging countries have to take serious restrictive measures if they hope to keep foreign capital in their countries. China, the second largest economy in the world, is attempting to pivot its nation away from a manufacturing base to one based primarily on consumption. Investing in quality companies is the best prescription for dealing with this uncertainty.”
Michael Weiner, CFA® Chief Investment Officer
Unified Trust Co.
“2014 will have similar challenges to 2013. Central bank liquidity and stimulus programs will shape capital markets and returns. Central banks will continue supporting asset prices, but it’s unlikely that cash flows, revenues, and multiples can expand like 2013. It’s equally unlikely that rates will remain stationary. Thus, we expect modest equity and interest rate increases. We base this view on the continued recovery in western economies, uneven recovery in emerging markets, slow migration from deflation to inflation, and shift in global expectations to “overly” positive views of central banks’ ability to contain the financial dislocation of accommodative monetary policy.”
Dave Harris, Senior Partner [Bob Sathe, Mark Botto, Andy Sathe & Jeff Jennings]
“We are viewing 2014 with cautious optimism. Equity markets are not likely to replicate 2013’s performance, but there is positive momentum. Corporate earnings growth is a concern. Earnings have benefitted significantly from cost containment to include lower interest expense and I believe future earnings will need to rely more heavily on top line revenue growth. In the end, I feel modest growth will push the equity markets higher in the range of 6 to 8 percent. Short-term interest rates will likely remain unchanged while intermediate and long-term rates will be slightly higher to reflect economic progress and “tapering” by the Fed.”
James R. Allen, Chairman and CEO
J.J.B. Hilliard, W.L. Lyons, LLC
“After several years when economic policy uncertainty, cautious consumers and additional regulations seemed to weigh down economic growth, conditions look better for 2014. The economy started picking up steam in the second half of 2013, finally growing faster than 3 percent. An improving job market and rising household wealth both support higher spending and confidence, creating a virtuous cycle. We expect the U.S. economy to accelerate slightly in 2014 from its average recovery pace, as the Federal Reserve steadily reduces its stimulus. An improving economy provides support for rising stock prices over time. We also expect long-term interest rates to rise as the Fed slowly reduces its bond purchases. Portfolios need the appropriate mix of stocks and bonds to stay balanced during the changing times ahead.”
J. Todd Hall, AAMS®, Financial Advisor