We are somewhat surprised by the high degree of investor complacency given the substantial slowdown in corporate earnings growth, economic headwinds facing us in the form of higher taxes and potential budget cuts, and recent signs of an economic slowdown.
-John Bonnell, AVP of fixed-income investments, USAA
- The USAA team is warning investors to tread cautiously in what they believe to be a complacent investing environment. They are somewhat surprised by the high degree of investor contentment given the substantial slowdown in earnings growth, economic headwinds facing us in the form of higher taxes and potential budget cuts, and the recent signs of an economic slowdown.
- Existing home sales fell in December, below consensus expectations, however home price metrics continue to rise. Manufacturing surveys are also down and the International Monetary Fund revised its economic growth outlook for 2013 to 3.5% inflation-adjusted growth for the world and 2.0% for the United States.
- Earnings season is in full swing and has surpassed estimates by an average of 2.5% in the fourth quarter – while better, it is still a marked deceleration from the first half of 2012. Stocks also powered to a new five-week high, but gold dropped 1.52%.
- The team’s 2013 investment outlook remains one of mild caution. They are positioned overweight in bonds, favor international and emerging-market stocks and gold and precious-metals mining stocks as an attractive long-term inflation hedge.