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Outlook 2013


Presented By: Brian Shepardson, CFA, CIC ~ Assistant Vice President

Interest Rates

Tax increases accompanied by mandatory spending cuts at the start of 2013 have brought about the concern over a Fiscal Cliff. Tax revenues have been rising slightly but extraordinarily high spending is the problem.

Federal Income Taxes are going higher. Depending on their structure, municipal bonds may offer relief for taxable accounts.

The Federal Reserve put Quantitative Easing in place with the intention of pushing rates lower. However, this process increases the money supply and had the unintentional consequence of causing investors to fear inflation. Instead of pushing rates lower, bond yields actually rose during the first two periods of Quantitative Easing. However, after they ended, bond yields fell, which gave bond investors a boost.

During much of 2012, lower quality bonds have led the way. In fact High-Yield bonds provided the best total return. With so many uncertainties in the world: unemployment, slow economic growth, Europe and rising tensions in the Middle East; a further flight to quality may occur. While lower quality bonds will reflect movements in stocks, we suggest investors start to shift to lower risk, higher quality issues.
Positives Negatives
Positive Economic worries are beneficial for bonds Negative Quantitative Easing policies push rates higher
Positive International unrest encourages flight to safety Negative Too much government spending may erode confidence
Positive Contrarian opinions present opportunities Negative Bonds lag when housing recovers
Positive Municipal bonds offer tax advantages Negative Debt crisis still looms
    Negative Inflationary pressures are mounting
Download The Long-term Economic Report (.PDF 1.8 Mb)   PDF


The views and opinions expressed are those of
James Investment Research, Inc.

This information is of a general nature and does not constitute financial advice. It does not take into account your individual financial situation, objectives or needs, and should not be relied upon as a substitute for financial or other professional advice to assess, among other things, whether any such information is appropriate for you and/or applicable to your particular circumstances. In addition, this does not constitute an offer to sell, or the solicitation of an offer to buy, any financial product, service or program. The information contained herein is based on public information we believe to be reliable, but its accuracy is not guaranteed.

Past performance is not indicative of future results.
 
 


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