by Mike Boslet
Updated 11 months ago
Florida wealth management advisers like U. S. equities — especially tech — and European and some emerging market stocks but warn to steer clear of bonds.
ProVise Management Group
Raymond Ferrara sees a continuation of slow growth in the economy and volatility in the U.S. stock market this year. He plans to be bullish on sectors that he sees improving in 2014, including housing, energy and retail. Meanwhile, he views utilities, banking and agriculture as unfavorable areas for investors. "With rising interest rates, each of these industries will find themselves under increasing pressure during the next year," he says. Ferrara advises against investing in long-term government bonds and any debt-laden companies, saying rising long term interest rates will negatively affect them. Beyond the United States, Ferrara favors markets in Europe and Australia."Europe is about three years behind the U. S. in recovering from the fiscal crisis.Therefore, we can expect them to begin a gradual pickup over the next 12 months, similar to what the U.S. has seen the past three years. Australia is very dependent on its natural resources, which have been in the dumps, but this industry appears to be starting its climb. With it the Australian economy in general should do well."
Tavares / Winter Park
Thomas Ruggie and his team don't expect their investment strategy to change much over last year's. Ruggie says they'll stick with the same sectors in 2014 — health care, technology, home construction, financials, biotechnology and consumer discretionary (the industry that responds to higher discretionary spending) — that fared well for them in 2013. Still, he adds, "after coming off a year with such strong earnings, there is always the concern of a pullback in the U. S. markets." He also expresses caution about investing in bonds, small and mid-cap markets, as well as commodities. "We are not Optimistic about core bond investing and believe we are going to see a four- to five-year bear market for fixed-income investing," he says. "We are cautious of the small and midcap markets as we believe there is more risk on the table with them right now, and we continue not to be fans of commodity investments in today's environment." His group's wealth management team sees a continued commitment to investing globally, including in Europe and China but with a cautious approach to the latter. China is "becoming a riskier venture," he warns.
Managing Director, Burke / Cox Group
Merrill Lynch Wealth Management, Heathrow
Kenneth Burke says Merrill Lynch's research investment committee projects profit growth and expansion driving the S&P 500 close to 2,000 by year's end. The committee, he adds, is bullish on technology, energy, automobiles and manufacturing in the United States but is cautious of bonds and commodities. "With our view of increasing interest rates," he says, "we'd favor lower-quality corporate (5% to 8% yields) bonds and laddered municipal bonds that have average yields of 4% tax free." Merrill Lynch also favors U.S. large cap over small cap and foresees continued resiliency in international equities. Burke says 2014 should be a particularly good year for the large-cap tech, industrials and energy sectors in the United States because "all three have a tendency to have Europe and Japan"— two foreign markets the committee favors — as customers. "From a valuation standpoint, the price / earnings and return on equity of those three sectors are quite appealing," he says.
J. Thomas Smith
Managing Director, Wealth Management
UBS, Palm Beach Gardens
UBS has a positive outlook of the U.S economy, seeing increased growth as consumer and capital spending recover this year, J. Thomas Smith says. Industrials and technology are two sectors that should do well, he says, with the former aided by renewed capital spending and the latter's current trading discount luring investors.UBS joins other wealth management advisers in steering clients away from long-term government bonds, but the firm doesn't share similar negative views of the muni bond market. "Many of the concerns are overdone," Smith says. "UBS expects that the Fed will maintain an easy money policy, and government bonds should be under weighted," he says. "Rising interest rates may hurt bond prices, and holders are not getting paid enough to take the price risk." The U.S. equity market is fairly valued, and UBS foresees an 8.5% earnings growth and a 6% to 9% return on equities this year, he says.
Morgan Stanley Graystone Consulting
Charles Mulfinger sees economic growth of between 2. 5% and 3% this year, but is concerned that the economy could suffer if the Affordable Care Act triggers rising health care costs and a new wave of political backlash. He is advising clients to invest in oil and natural gas pipeline companies, saying the "resurgence of oil and natural gas production in the U.S. requires the ability to transport that supply to markets." Mulfinger also favors growth stocks over value stocks in 2014, "due to our expectation that the strong earnings growth we have seen in the past few years decelerates" this year.But the U.S. bond market looks unappealing, he says, as interest rates climb. "We have been suggesting to clients to reduce their bond allocations below their strategic targets in fixed income and shorten the duration of their portfolios," he says. A foreign market that has caught Mulfinger's eye is Japan."We turned positive on Japan in 2013 and continue to favor this market in 2014," he says, crediting the country's economic policies for creating a favorable investment environment.
Chief Investment Strategist
Tampa Bay Trust Co.
Pat Dorsey takes a contrarian view of what's often viewed as safe and what's seen as risky. "Generally speaking, we are finding 'safety,' such as consumer staples, to be less attractive, and 'risk,' such as some industrials and select consumer discretionary companies, to be more attractive," he says. He finds equities promising because they are "reasonably valued, especially in the context of low inflation and low interest rates. However, investors need to moderate their expectations. Dorsey says equities will likely appreciate in line with earnings growth of 6% to 7%. He, too, sees red flags waving over the bond market and "anything sensitive to rising interest rates, such as real estate investment trusts." Looking abroad, Dorsey likes European equities because they're "20% cheaper than equities in the U.S., and emerging markets are very attractive at just 11 times earnings." But China's slowdown in infrastructure development is cause for concern, he says, adding that investors should avoid companies that are tied to Chinese construction spending.
Senior Portfolio Manager, Florida Region
Fifth Third Private Bank
Howard McElfresh shares a common view among financial advisers that the U. S. economy will improve in 2014."We expect GDP ranging between 2% and 2.5%" in 2014, he says. That said, the stock market has the potential to continue a strong performance this year, "and we will continue to overweight stocks," he says. Stock sectors that look the most attractive are technology, industrials and consumer discretionary, he says, pointing to an improving global economy as an impetus for their positive growth. "We would favor multinationals" in these sectors, he says. The bond market, however, doesn't look promising, says McElfresh who sees low single digit returns in that investment space."As an investor, you would need to be happy with a 'yield-to-maturity rate' vs. looking for appreciation in this sector," he says, "Again, we feel that there is limited upside potential here." He advises staying out of long-term bonds altogether, citing their sensitivity to rising interest rates. Beyond U.S. borders, he sees emerging markets as favorable long term investments but expects 2014 to be a challenging year for them.
Managing Director, Financial Adviser
The Nickler Group at Morgan Stanley
West Palm Beach
"We do not see robust growth, nor do we see recession or inflation being an issue in 2014," says Mike Nickler, who maintains the U.S. economy will remain in a slow-growth mode. Nickler says his investment group will be cautiously bullish on equity markets but bearish on bond markets, "especially Treasuries and investment-grade corporate bonds. We believe the U.S. bond market will be fat to down." The Nickler Group is more bullish on global high-yield and emerging market debt because the global macroeconomic environment appears to be improving.Nickler says his team's strategy includes "steering clear of Treasury securities, investment-grade corporate bonds and utilities." However, he adds, "we are bullish on energy, health care and technology" stocks, a common refrain among financial advisers.Looking elsewhere, Nickler believes Europe is coming out of its recession and its economic recovery should lead to better stock performance.For that reason, he likes European stocks because they're "still cheap relative to U.S. stocks and are showing better earnings momentum."