ST. LOUIS--(BUSINESS WIRE)--
The economy has likely entered a modest expansion, according to The Commerce Trust Company in its recently-released Mid-year Market Outlook. The semiannual online newsletter provides national and global economic and financial market perspectives on fixed-income, equity and alternative investments for the company’s Private and Institutional Trust clients.
“We believe the U.S. economy has likely entered a self-sustaining moderate recovery with smoother roads ahead,” said J.-J. Landers Carnal, chief investment officer, The Commerce Trust Company. The reason for this, according to Carnal, is massive monetary policy accommodation (both here and abroad) which has significantly lowered interest rates and helped to support aggregate demand for goods and services while reducing risks. “In addition, deleveraging has improved both corporate and consumer balance sheets,” Carnal added. Additional highlights of The Commerce Trust Company’s Mid-year Market Outlook:
- Treasury yields are drifting upward as the Federal Reserve Considers tapering their bond purchase programs
- The Federal Open Market Committee is anticipating no Fed Funds rate hikes until the second half of 2015
- The S&P 500 has gotten off to a robust start in the first five months, rising about 15%
- Commerce Trust Company believes equities could see an additional 5 % to 7% growth in 2013. Valuations for the market remain reasonable.
- The housing sector is now well into what appears to be a strong and sustained recovery
- Looking outside the United States, global headwinds persist. The Eurozone is likely to remain the weakest of the developed countries
- Commerce Trust Company projects that U.S. GDP will grow in the range of 2% to 2.5% for 2013, with the unemployment rate declining modestly
- Potential breakout of consumer confidence which has been at lows for nearly four years
The overall U.S. bond market, as measured by the Barclays Aggregate Bond Index, returned -0.91% for the first five months of 2013. Investors have started to lose some of their enthusiasm for bond funds. Reduced customer inflows make the bond market more susceptible to additional selling pressure. “Over the remainder of the year, we anticipate money will begin to shift from fixed income funds over to equity funds as investors notice their fixed income returns dwindling,” said Carnal.
While the S&P 500 got off to a robust start in the first five months of 2013, many investors remember the period following the previous highs were not too favorable for equity investors, so the natural question is whether it is time to reduce an overweight position in equities. “Our answer is no, since we believe equities could see an additional 5% to 7% o the upside in 2013,” Carnal said. “Even with strong gains this year, the valuation levels for the market remain reasonable with the S&P 500 Price/Operating Earnings Ratio at 16.6 times earnings and only 0.5 above the 50-year average of 16.1 times. Given the low level of interest rates, we could see the multiple expand 18 times. Reported earnings for the remainder of the year will accelerate and should surpass 10% growth versus 2012.”
For more information, go to The Commerce Trust Company Market Update at: www.commercebank.com/wealth-management/trust/resources/economic-outlook.asp
About The Commerce Trust Company
As of June 30, 2013, The Commerce Trust Company was responsible for the administration of more than $31.2 billion of total client assets.
Since 1906, Commerce Trust has been a leading source of tailored asset management, creative private banking and comprehensive trust services for individuals, families, corporate executives, and business owners. In addition, Commerce Trust serves a variety of institutional clients with customized investment programs as well as sole-source solutions for all of their financial needs.
The Commerce Trust Company is a division of Commerce Bank.
About Commerce Bank
Commerce Bank, is a subsidiary of Commerce Bancshares, Inc. (CBSH), a $21.9 billion regional bank holding company, as of March 31, 2013. For more than 145 years, Commerce Bank has been meeting the financial services needs of individuals and businesses. Commerce Bank provides a diversified line of financial services, including business and personal banking, wealth management, financial planning, and investments through its affiliated companies. Commerce Bank operates in more than 360 retail locations in the Central United States and has a nationwide presence in the commercial payments industry. Commerce Bancshares also has operating subsidiaries involved in mortgage banking, leasing, credit-related insurance, private equity and real estate activities.
For additional information, please visit www.commercebank.com.
Past performance is no guarantee of future results and the opinions and other information in this news release are as of July 17, 2013.
Diversification does not guarantee a profit or protect against all risk.
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