Bank of the West Wealth Management Looks to U.S. and Frontier Markets as Portfolio Recommendations
SAN FRANCISCO, May 9, 2012 /PRNewswire/ — Bank of the West’s Wealth Management Group advises investors to maintain a conservative tactical asset allocation despite the recent gains in U.S. markets in its second quarter investment and economic outlook. Specifically, the team favors large capitalization U.S. stocks and modest exposure to international emerging and frontier markets in its equity portfolio allocations. In the tax-free fixed income sector, the team continues its maximum overweighting in high quality municipal bonds.
“We are encouraged that the U.S. markets continue to show less correlation with international developed market performance, driven in large part by positive yet modest economic forces. We also see positives from continued strengthening of corporate balance sheets, and accommodative U.S. monetary policies. However, the current recovery is still a work in progress,” said Don Silva, head of Investment Advisory & Management for Bank of the West’s Wealth Management Group.
The outlook noted a number of factors to watch that could cause disruption in the investment markets, including the likelihood and magnitude of a European recession as well as oil price pressures.
Equity Opportunities at Home and On the Frontier
The bank’s portfolio management team favors the U.S. equity market overall, noting that faster than expected U.S. economic growth, ongoing manufacturing expansion, and other factors bode well for this equity asset class.
“The first several months of returns in 2012 have been a breath of fresh air and partially reflect the positive corporate earnings and economic growth experienced in 2011 that went unrewarded by the equity markets. These encouraging indicators of the U.S. economy only translated into a 2.11% return on the S&P 500 Index for 2011. Some of the gains in 2012 are a catch up from what should have transpired in 2011,” said Wade Balliet, director of equities for the bank’s Wealth Management Investment Advisory & Management team. “We believe that a disciplined approach to investing is just as important now as ever as the reality of a slow and uneven economic recovery continues through the end of the year.”
The team’s asset allocation models include a slight overweight position in frontier markets and a modest allocation to international emerging markets as part of a balanced portfolio. “Although there is still some hesitation around a true belief in a bull equity run in frontier markets, these commodity heavy markets have respectable valuations and growth prospects,” said Balliet. “Emerging markets have certainly rallied from lows in October, but opportunity remains as they have not yet recaptured the highs of 2010 and fears about a hard landing in China are easing.”
Longer-Term Munis Attractive; Government-Sponsored MBS Provide Balance
In fixed income, Bank of the West’s Wealth Management Group continues its maximum overweight recommendation for the high quality municipal bond asset class as a whole. For taxable bond investors the team looks to government-sponsored mortgage-backed securities as a vehicle for reducing portfolio volatility by means of principal repayment and regular cash flows, especially for credit sensitive investors or those who must maintain investments in the government-sponsored space.
“We still see a supply-demand imbalance in the tax-exempt muni market that will continue to drive performance. Yields have declined from a year ago in this category, but there is still good opportunity with longer-term yields remaining significantly higher than short-term,” said Silva. “Not all municipal issues are created equal, and we are advising investors to be selective.”
In particular, the team recommends general obligation and essential service revenue bonds, both with an overweight recommendation.
For U.S. Treasuries, the team expects a reversal of the “flight to safety flows” and slowly rising yields, according to Silva, and maintains its maximum underweight recommendation.
The team expects the additional strengthening of corporate and municipal balance sheets due to U.S. GDP growth prospects. As a result, it continues its overweight recommendation for investment grade corporate bonds.
The Wealth Management Investment Advisory & Management group at Bank of the West tracks and updates these investment themes throughout the year and applies its recommendations to the portfolios it manages for fiduciary clients.
Bank of the West Wealth Management provides wealth planning consulting, investment management*, personal banking, and trust services. The group is part of BNP Paribas’ global wealth management business of more than 6,000 professionals in 30 countries worldwide with nearly $10 billion** in assets under management in the United States and $322 billion (euro 245 billion) in assets under management globally as of December 31, 2011.
About Bank of the West:
Founded in 1874, $62.4 billion-asset Bank of the West (www.bankofthewest.com), member FDIC and equal housing lender, offers a full range of personal, commercial, wealth management and international banking services. The bank operates more than 700 retail and commercial banking locations in 19 Western and Midwestern states. Bank of the West is a subsidiary of BNP Paribas, which has a presence in 80 countries with nearly 200,000 employees.
All investments involve risk. Investors should seek the advice of a financial professional regarding the appropriateness of any securities or strategies discussed. Foreign securities, especially emerging markets, will involve additional risks including exchange rate fluctuations, social and political instability, less liquidity, greater volatility and less regulation. Frontier markets have lower market capitalization and liquidity than more developed emerging markets. Treasuries are subject to interest rate risk, call risk, and inflation risk. An investment in corporate bonds is subject to a variety of risks including credit and default risk, market risk, event risk, call risk, interest rate risk, foreign risk, and sector risk. Mortgage backed securities are subject to prepayment risk. Municipal bonds are subject to a number of risks such as interest rate risk, call risk, inflation risk, credit and default risk, and tax risks.
The opinions and recommendations presented are the views of the Investment Advisory & Management team of Bank of the West’s Wealth Management Group and not of BancWest Investment Services. BancWest Investment Services does not produce investment research. The discussions and information presented should not be construed or used as a specific recommendation for the investment of assets of any customer of Bank of the West or its affiliates and is not intended as an offer, or a solicitation of an offer, to purchase or sell any security or financial instrument, nor does the information constitute advice or an expression of the Bank’s view as to whether a particular security or financial instrument is appropriate for you and meets your financial objectives. Economic and market forecasts reflect subjective judgments and assumptions, and unexpected events may occur. Past performance is no guarantee of future results.
*Investments and variable annuities are offered through BancWest Investment Services, Inc., a registered broker/dealer, Member FINRA/SIPC. Financial Advisors and Private Client Advisors are registered representatives of BancWest Investment Services, Inc. Fixed annuities/insurance products are offered through BancWest Insurance Agency in California (License # 0C52321) and through BancWest Insurance Agency in Utah, and through BancWest Investment Services in AZ, CO, IA, ID, KS, MN, MO, ND, NE, NM, NV, OK, OR, SD, WA, WI, WY
Bank of the West Wealth Management provides financial products and services through Bank of the West and its various affiliates and subsidiaries. Neither BancWest Investment Services, Inc., nor Bank of the West offers tax, accounting, regulatory or legal advice to clients.
BancWest Investment Services, Inc., is a wholly owned subsidiary of Bank of the West. BancWest Corporation is the holding company for Bank of the West. BancWest Corporation is a wholly owned subsidiary of BNP Paribas.
Investment, Annuity, and Insurance products are:
NOT FDIC INSURED — NOT BANK GUARANTEED — MAY LOSE VALUE — NOT A DEPOSIT — NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
** Including assets under supervision at BancWest Investment Services
Available Topic Expert(s): For information on the listed expert(s), click appropriate link.
SOURCE Bank of the West