Riverside Community Bank shares view of economy
From press release
There seems to be no agreed-upon direction for the economy—up or down, better or worse, now or never—it’s nearly impossible. The best way to describe it would be “slogging.”
And “SLOG: Slow. Long. Ongoing. Grind.” was the title of this year’s 2011 Economic and Market Forecast hosted by Riverside Community Bank’s Wealth Management Group (WMG).
Andrew Douglas, CFA, senior vice president and chief investment officer for WMG, reviewed the nation’s current economy, forecasted what it might look like in 2011, and examined potential investment opportunities.
WMG supervises nearly $1.9 billion in assets through several subsidiaries of Heartland Financial USA, Inc., parent company of Riverside Community Bank.
Good news for the economy in 2011
The biggest positive is the health of the corporate sector. Business spending has been relatively robust and corporate balance sheets are very strong. “Corporations have the ability and we look for them to soon be willing to increase hiring,” Douglas said.
Bad news for the economy in 2011
The labor market is the biggest negative, as the country has seen the deepest job cuts in the post-war period during this recession. While the situation is improving, it is still tentative and growth is very slow. This leads to a seemingly stagnant economy.
“While we are forecasting a slow improvement in the labor situation, anything less than what we foresee would mean very tough economic and market environments,” Douglas said.
Chances of a double-dip recession
Douglas places the odds of a double-dip recession very low, assuming the tax cuts are extended for at least the majority of the tax brackets. Given that assumption, he thinks the probability of the double dip is roughly 10 to 15 percent.
When thinking about investments in the coming year, Douglas said because stocks have been flat over the last decade and bonds returning over 6 percent per year during the same period, there is a temptation to overweight bonds. This is augmented by the lower historical volatility of bonds.
“However, investors need to be very cautious about taking this action, as the ability of bonds to provide any type of return will be greatly diminished in a low or slowly rising interest-rate environment,” he said. “As always, investors need to focus on building a well-diversified portfolio.”
For more information about Riverside Community Bank’s Wealth Management Group, visit wmgplanonit.com or call (815) 637-7014.
From the Dec. 29-Jan. 4, 2011 issue
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