Investor'sEdge - Ziv Investment Company
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investor’sEdge
First quarter 2020
Investment outlook
for your 2020 portfolio
While the economy is in the later stage of expansion, investors may
still find opportunities in the financial markets. However, a continued
need for vigilance will also carry over into the new year. These are
two key themes to keep in mind for the near term, according to the
Global Insight 2020 Outlook, recently published by the RBC Wealth
Management Global Portfolio Advisory Committee.
This industry-leading annual report muted expectations for S&P 500 earnings
provides a forecast for the global equity growth in 2020. However, consensus Inside this issue
and fixed income markets, plus regional forecasts by industry analysts are still
economic outlooks and currency too optimistic rather than reflecting this 1-2 Investment outlook for
projections. Below is a brief summary of view. For this reason, the consensus your 2020 portfolio
the five articles in this much sought-after estimates for growth may come down 3 Make a difference with your
publication. closer to the mid-single-digit range that investments this year
RBC Capital Markets is forecasting for
Views by asset class and region 4 ew Year 2020—
N
S&P 500 profits. Therefore, a market
U.S. Fixed Income: The Fed looks set to resolve to keep family
weight allocation to U.S. equities
take a wait-and-see approach to interest wealth organized
remains appropriate.
rate policy and the economy in 2020, 5 Explore a strategic
after delivering three rate cuts in 2019. Key 2020 currency and commodity solution to manage
The global hunt for yield drove yields forecasts are as follows:
unexpected tax liabilities
on high-yield debt to nearly the lowest U.S. Dollar Index—carry on: $97.34
levels on record. With yields below 6% EUR/USD—growing pains: 1.12
in this sector, and the economic cycle GBP/USD—hostage to Brexit: 1.30
in its later stages, investors simply
WTI crude oil—range-bound: $58
may not be adequately compensated
for risks. Therefore, in fixed income, Natural gas—inventory builds: $2.45
consider focusing on investment-grade Gold—consolidation: $1,500
corporates and bank-issued preferred Source: RBC Capital Markets, Nov. 19,
shares for income—where balance 2019. All opinions, estimates and forecasts
sheets remain pristine. constitute RBC Capital Market’s judgment
as of the date of this report, are subject to
U.S. Equities: After coming off a strong
change without notice and are provided in
run in 2019, patience may be an
good faith but without legal responsibility.
important virtue for equity investors in
the coming year. Anecdotal evidence
among institutional investors points to Continued on page 2
Investment and insurance products are not insured by the FDIC or any other federal
government agency, are not deposits or other obligations of, or guaranteed by, a
bank or any bank affiliate, and are subject to investment risks, including possible
loss of the principal amount invested.
Investor’s Edge | 2
Investment outlook for your 2020 portfolio, continued
Equities and the economy Low interest rates often nudge savers reason, consider upgrading quality in
Investors may see higher ground for into taking larger investment risks in an corporate bonds, largely because the
equities in 2020. Yet there are more effort to secure some sort of return, or yield available in speculative-grade
reasons to be cautious than at any time at least to avoid locking in guaranteed corporates is exceedingly low relative
in the past decade. (albeit small) losses. However, this may to the risks.
increase their vulnerability to periods of
U.S. recessions are historically financial market volatility.
A new industrial revolution
associated with equity bear markets in Next-generation innovations are
all the developed economies, but the Negative interest rates also encourage leaping from the sci-fi drawing
start of the next U.S. recession looks to economic actors to rely upon cash to a board into reality, upending and
be a year or more away. Accommodative greater extent rather than suffer losses rejuvenating the industrial landscape.
monetary policy, some additional fiscal in a bank account or the bond market. These breakthroughs may disrupt the
stimulus and a confident consumer This threatens to reduce tax compliance, status quo in the coming years. The
should keep the U.S. and most other compromise government tax revenues, change forces are already impacting
developed economies growing through and increase the incidence of loss current valuations, and investors may
next year, and probably longer. That through theft. want to assess how this new dawn is
should engender growth in corporate The current economic cycle may be transforming the investment outlook for
earnings, dividends and buybacks. Share extended thanks to central banks’ the industrials sector. Three technologies
prices should rise as well. actions to push rates to ultralow to watch include the following:
However, there are at least two or negative levels, but it may also Automation: With the
1.
complicating factors facing investors. eventually become more fragile as a eventual adoption of lights-out
First, while renewed monetary stimulus result of these policies. The economy is manufacturing, growth of warehouse
is breathing some extra life into the firmly in the late stage of the business automation may track that of
longest-ever economic expansion, it may cycle, and this calls for a degree of e-commerce. Growth in this large
not kick GDP growth into a higher gear vigilance while recognizing that there are subsector could reach 10–15%
that would offer the prospect of several still opportunities in financial markets. annually over the medium term.
successive years of above-average The low rates puzzle 2. S
mart water systems: These systems
earnings growth. Second, bull markets can address water leakage and
In business cycles, it’s often the case
have usually peaked before a recession infrastructure deficiencies, water
that the solution for one problem
starts—sometimes as much as a year shortages, and can help bring forth
becomes the source of the next. Low
in advance. new water processing technologies.
rates and quantitative easing were part
With these facts in mind, investors may of the solution to the debt problems of In the coming years, investors may
expect new highs and moderate returns 2008. Higher asset prices and a reduced expect to see desalination processes
for the coming year. But right alongside interest burden helped stabilize a and water reuse/recycling initiatives
this is a heightened need for caution precarious situation. increasingly adopted by cities
acknowledging that the late cycle carries around the world.
The “fix” for the debt problems of
particular challenges for both the 3D printing: The versatility of this
3.
the last decade created a new set of
economy and the stock market. technology offers manufacturing
challenges for savers. Additionally, there
Negative interest rates are signs there is a diminished impact opportunities denied by traditional
from additional rate cuts from both an welding and machining methods.
Central banks are cutting rates with
the intent of boosting growth by inflation and GDP growth perspective. To request a copy of the Global Insight
encouraging individuals to save less The salient point for fixed income 2020 Outlook—and to discuss your
and spend more. But low interest rates investors is they should not let a low financial goals and how to position your
can also limit the ability of monetary yield environment push them out of their portfolio for success in the new year—
stimulus to rescue economies when comfort zones and into making decisions contact your financial advisor.
they run into trouble. In turn, recessions that could put portfolios and long-term
could become more frequent or more investment objectives in jeopardy.
severe. Any behavioral distortions
of savers and borrowers alike due to Given current economic conditions and
ultralow rates can create fragility within forecasts, investors may expect that any
the economic system. downturn—when it arrives—is likely
to be comparatively shallow. For this
Investor’s Edge | 3
Make a difference with your
investments this year
Many individuals set New Year’s resolutions to make a difference, whether it’s to
better themselves or their communities. This year, responsible investing strategies may
provide the opportunity for people to do both.
Responsible investing is a broad term Fund change through impact investing. If you are interested in exploring how
for investors supporting a wide range The goal of impact investing is to to incorporate your values into your
of goals. For example, some have generate positive, measurable social portfolio decisions, ask your financial
environmental concerns, and others and environmental impact along with a advisor about responsible investing
want to find ways to help economically financial return on the investment. strategies. There are pros and cons to
under-developed countries grow. Some each style, and because every investor
may be looking for ways to help feed You may discover you fit perfectly in has unique goals and investing choices,
the world, and others want to improve one of the three styles for responsible there is no set formula to follow.
educational opportunities globally. investing, or need a blend of all
All fit into the category of responsible three styles to best fit your portfolio With your financial advisor, you’ll want
investing, and allow investors to and interests for achieving positive to carefully discuss your goals both for
choose ways to make a change through change in your community, the nation the return on your investment and for
their investments. and globally. the change you want to help make in
the world.
There are three approaches you can
take to accomplish your responsible
investment goals.
Withdraw support from companies
with characteristics that do not align
with your values. This is an activity
many investors choose first, but
discover it’s difficult to be universal with
an investment stance from company to
company. For example, if you would like
to remove companies that make, use,
transport or service the development
of fossil fuels, you may also want to
extend your list to include any company
that uses fossil fuels to distribute their
products from factory, to store, to
your home.
Seek leaders among securities issuers
who support environmental, social
and governance (ESG) factors. ESG
investing allows investors to financially
support private and public enterprises
that are making strides to better any
or all of the ESG factors. Investors also
have the opportunity to advocate,
as shareholders, for changes with
companies that don’t meet the desired
ESG factors.
Investor’s Edge | 4
New Year 2020—resolve to
keep family wealth organized
It doesn’t matter if you’re in the New Year’s Beneficiaries
resolution-making camp or not. The start of Always review your beneficiaries listed
the year is a good time to review your family on retirement and insurance accounts to
wealth plan and discuss your family’s strategy ensure they match your intentions, because
for transferring ownership of wealth. beneficiary designations supersede the
instructions in your will and/or trust.
Transferring wealth is often a difficult
conversation for families, but it’s important if
Charitable giving
you want to establish your legacy, both now
and for future generations. Legacy planning One way families establish lasting legacies is
takes time, and here are some of the elements through philanthropy. You may wish to support
your family should consider and discuss to favorite charities while you’re living through
ensure your plans reflect your intentions. a donor advised fund, or establish a trust that
continues your legacy after you are gone.
Estate plan
Charitable giving also provides you with
Working with your financial advisor, tax planning techniques to reduce the potential
advisor and attorney, you can develop a estate tax your heirs face. Be sure to work
comprehensive plan for transferring all of your with both your financial and tax advisors to
assets while best managing estate taxes and choose charitable giving approaches that are
possible tax liabilities for heirs. appropriate for your overall legacy plan.
Will New Year’s updates
Part of the estate planning process is When you meet with your financial
developing a will, which allows you to advisor in the coming year, talk
specifically identify heirs you intend to receive about changes in your family
specific assets. Keep in mind, a will does not dynamics, like a wedding,
keep your estate (and family information) out divorce, birth or death,
of probate court. to ensure your financial
plan is up to date.
Estate executor
It’s important to carefully choose an executor Contact your
who will follow your wishes as outlined in your financial advisor
will and estate plan. This person may be a close about planning
family friend or a professional trustee. your legacy, and
review your plan on
Trusts an annual basis to
Establishing a trust for your estate will allow ensure it continues to
heirs to minimize probate. There are many meet your intentions.
types of trusts which serve different family
needs. Your financial advisor can work with
your legal and tax professional to start the
conversation and find the best option for your
estate-planning purposes.Investor’s Edge | 5
Explore a strategic solution to manage
unexpected tax liabilities
Last year’s tax season found many Americans surprised by their lack of a tax refund.
This year, it may be beneficial to plan liquidity solutions designed to protect your long-term
investment goals in case an unforeseen tax bill is in your future.
Taxes are a fact of life, and you likely You may choose between a variable or Contact your financial advisor to apply
take steps throughout the year to avoid fixed-rate line of credit, subject to credit for your RBC Credit Access Line, and
surprises come April 15. That’s why approval. You can apply for a line of to discuss any concerns that require
it’s good to have options available in credit through your financial advisor. strategic planning for the 2020 tax year.
case life throws you a curve ball during
tax season. Even if you don’t access your line of
RBC Credit Access Line is a securities-based,
credit this tax season, it’s available if demand line of credit offered by Royal Bank of
As you’re preparing your tax return another unexpected life event happens, Canada, an Equal Opportunity Lender and a bank
for 2019, it’s also a good time to plan providing you with confidence you are affiliate of RBC Capital Markets, LLC. Subject to
credit approval. Securities-based loans involve
ahead for the 2020 season. Work with prepared for life’s curve balls during and special risks, are subject to minimum collateral
your tax advisor to determine your after tax season. requirements, and are not suitable for everyone.
proper withholding amount if you are Additional restrictions may apply.
still working. If you are retired, contact
those same experts to help determine
amounts for estimated payments
throughout the year.
Gain portfolio liquidity to
cover tax surprises
The April 15 deadline for filing and
paying taxes is set in stone for this year.
But what happens when your cash flow
doesn’t line up with this tax deadline?
If you face a liquidity need due to an
unexpected tax bill, an RBC Credit
Access Line, offered by the Royal Bank
of Canada, may provide a short-term
financing solution without interrupting
your long-term financial goals.
There is no cost to open this securities-
based line of credit, and there are no
interest charges until you initiate a
credit advance. These factors make a
line of credit a flexible liquidity solution
for covering surprise tax bills—if you
need it. They may also help you avoid
tax liabilities and fees associated with
selling other assets.The information contained herein is based on sources believed to be reliable, but its accuracy cannot be guaranteed. Our firm does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in connection with your independent tax or legal advisor. The articles and opinions in this advertisement are for general information only and are not intended to provide specific advice or recommendations for any individual. All information as of 12/01/2019. © 2019 RBC Capital Markets, LLC. All rights reserved. RBC Wealth Management, RBC Correspondent Services and/or RBC Advisor Services, are divisions of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC. 19-001-0314_01598-CAS (12/19)
You can also read
