Political and market change
Ameriprise Financial market strategists offer perspective on the state of capital markets and suggest how to respond to current market conditions
Marc A. Zabicki
Marc A. Zabicki, CFA, Ameriprise Financial senior market strategist and lead portfolio manager, Active Opportunity ETF Portfolios® investments, provides his point of view on equity markets.
The anticipated – if only short-term – budget and debt-ceiling clarity from Washington has eased financial market tensions temporarily. However, lawmakers will be back at it again early in 2014, and debt-ceiling issues could again cause a bout of market volatility in January and February unless the bipartisan congressional budget committee is able to deliver a budget resolution to congress by Dec. 13.
The more-constructive news for investors: The political wrangling likely means easy monetary policy from the Federal Reserve, and the central bank’s bond purchase tapering plan may get put on the back-burner for the next several months. This could help soften any political tumult in financial asset prices.
We believe investors should not be dissuaded by the Washington sideshow, and we remain confident that the equity portion of their portfolio is likely to forge ahead. While some low-hanging equity fruit may have already been picked in 2013, there is plenty of opportunity for well-reasoned equity strategies over the short, intermediate and long term.
At the current point of the global economic recovery, we are finding notable value in foreign equity markets, and we particularly favor European stocks at this time. While domestic equity exposure is necessary, we believe it’s a good time to ensure that equity portfolios have an international flavor.
Brian M. Erickson
Brian M. Erickson, CFA, director of fixed income research and strategy at Ameriprise Financial, shares his insights on the fixed income markets.
Continued Fed purchases of $85 billion of Treasuries and mortgage securities should help sustain moderate economic growth into next year, in our view. This has offered an attractive platform for investment-grade and high-yield corporate bond investment; a trend we see extending into 2014.
We see long-term bond yields moving higher next year. As a result, we recommend total-return investors deploy a measured approach to interest sensitive fixed income allocations by holding healthy short-term allocations and reducing traditional long-term bond exposure.
The rise in long-term bond yields so far this year has resulted in modest losses in many fixed income segments. At the same time, bond yields have begun to return to more attractive levels for long-term income investors.
We see high-yield credit and global bond allocations as critical elements for investors seeking to avoid rising interest rates in the U.S. In particular, dislocation this past summer in emerging markets has created an attractive entry point for emerging market bonds.
The views expressed here reflect the views of Ameriprise Financial as of October 24, 2013. These views may change as market or other conditions change. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances.
Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.
Stock investments have an element of risk. High-quality stocks may be appropriate for some investments strategies. Ensure that your investment objectives, time horizon and risk tolerance are aligned with stocks before investing, as they can lose value.
International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets.
There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk.
In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities.
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