The 2013 Commentary Scorecard

Guggenheim Partners (Scott Minerd)

In Minerd’s Restricted Room for Higher Rates, published Jan. 7, 2013, he forecasted interest rates and housing data for 2013. He mentioned in GDP on Jan. 10, 2013, in A Brighter Picture for Jobs and the Economy.

• “Interest rates should rise through 2013, however, the level to which they can increase will be limited by the Federal Reserve’s ongoing attempt to stimulate activity in the housing market. … Typically, periods of rising interest rates hamper mortgage applications, and consequently reduce the volume of home sales. Given this relationship and the Fed’s emphasis on supporting the U.S. housing sector, it appears unlikely the Fed will allow interest rates to rise materially in the near-term.”
• “At the state and local level, the U.S. is forecasted to enjoy the most significant job growth in over half a decade. Contribution to overall GDP growth from the state and local sector is expected to finally turn positive in 2013 after being negative since 2009.”

ING Investment Management (Douglas Cote and Karyn Cavanaugh)

Cote and Cavanaugh discussed the “ABCD’s” of market drivers in their Jan. 3, 2013, 2013 Forecast: Good Economy, Challenged Markets.

• “ Our forecast for S&P 500 2013 earnings is $101 per share, less than the $105 per share we forecasted for 2012. Combined with a price-to-earnings multiple of 15 – we expect multiple expansion from current levels given the extraordinary monetary easing by central banks around the world – this gives us a year-end 2013 price target of 1,515 for the S&P 500.”
• “Those who have spent the past three years preparing for inflation are likely to again be disappointed in 2013. In fact, we would welcome a certain amount of inflation, as reflation of price levels back up to more reasonable levels – say, ten-year Treasury yields above 3% – would suggest a healthy economy. In fact, at this point we think deflation is equally as likely to occur. “
• “2.0% [GDP] growth.”
• “2% yield for the 10-year Treasury bond.”
• “$1,400 per ounce [gold].”

Invesco (Greg McGreevey and Richard Golod)

McGreevey discussed Invesco’s outlook for 2013 in his Jan. 22, 2013, Invesco Fixed Income 2013 Outlook. Golod thought inflation would be the dominant driving factor in 2013, among other projections in his Jan. 7, 2013, commentary, Global Market Commentary: Follow the Money, Again.

• “ Until we see an increase in key economic factors – growth, velocity of money, private credit creation, higher employment, higher spending – we believe inflation will be contained, and the Fed and the ECB will continue to attempt to keep rates low across the yield curve.” (McGreevey)
• “Our view is that despite all this central-bank intervention, developed market growth will slow somewhat in 2013 from 2012 levels. Specifically, we expect 1.5% to 1.8% year-over-year gross domestic product (GDP) growth in the US and zero to negative GDP growth in Europe.” (McGreevey)
• “China is a very different story. While we expect China to move from an investment-led to a consumption-led economy, we still expect public-sector fixed investment to support GDP growth in the 7.5% to 7.8% range.” (McGreevey)
• “A new government with new promises for additional fiscal and monetary policies has reignited investor confidence. The declining yen/dollar exchange rate could continue to benefit Japanese stocks.” (Golod)
• “U.S. stocks will remain attractive in 2013. … The equity market has become increasingly sensitive to changes in inflation, but the inflation rate looks to stay low for a prolonged period.” (Golod)

iShares Blog/BlackRock (Russ Koesterich)

Koesterich forecasts were in his Jan. 3, 2013, Outlook 2013: Fiscal Cliff Remains Unresolved, but Opportunities Still Exist and in his Jan. 16, 2013, piece, 3 Reasons the Stock Market Rally Could Falter,

• “Regarding our outlook for economic growth, we still believe the US economy will grow modestly in 2013. While fiscal policy and political gridlock are negatives, there are other factors that remain supportive of growth, including a modest recovery in housing and further improvements in household balance sheets. … We expect US economic growth to remain around the 2% level—a slow rate, to be sure—but absent a complete failure from Washington, growth should remain positive.”
• “Additionally, we expect both interest rates and inflation in the United States to remain well contained, at least for the first half of the year. In sum, we expect US economic growth to remain around the 2% level—a slow rate, to be sure—but absent a complete failure from Washington, growth should remain positive.”
• “Taking a look at financial markets, we would expect stocks to outperform bonds

  again in 2013. … I expect equity markets to continue to advance and to outperform bonds for the year as a whole, with the best performance likely coming in emerging markets.”

Lord Abbett (Milton Ezrati)

Milton Ezrati offered predictions on January 31 in his commentary Signs of a Solid 2013 for Stocks.

• “Though U.S. equities have done well during the past year and so far this year, still-attractive valuations offer room for this welcome trend to potentially continue in 2013, even though earnings will likely grow slowly.”
• “Gross domestic product (GDP) [would] likely to expand only 2%.”
• “Inflation would likely to run around 2-2.5%.”

Managers Investment Group

Managers discussed the market in 2012 and the outlook for 2013 in its Jan. 9, 2013, Financial Markets Review and Outlook: Fourth Quarter 2012.

• “As investors continue to grow weary of receiving no-to-negative real returns on these investments into 2013, and resolution occurs on some of the aforementioned issues, we believe the tide will, finally, start to turn in favor of more risk-based assets. The lack of enthusiasm for risk-based assets, and equities in particular, only serves as further support for these investments as investor flows tend to be a contrarian indicator.”

Millennium Wave Advisors (John Mauldin)

Mauldin made predictions about the U.S. stock market in his Jan. 2 commentary, Somewhere Over the Rainbow, and about U.S. interest rates and Japan in his Jan. 15 commentary, Forecast 2013: Unsustainability and Transition:

• “It is therefore important to recognize that slower growth will have a significant impact on P/E at all levels of the inflation rate. As the discussion evolves into implications and probable outcomes over this decade, slower economic and earnings growth will have a direct effect on the P/E range.

  We are frequently asked how we expect lower valuations to manifest themselves. The single-digit P/E ratios that are typical of the end of a secular bear market and the beginning of a secular bull market would mean either a significant drop in the current valuation of the stock market or a prolonged sideways market. A general awareness and acceptance of a slower-growth economy would certainly help bring about lower valuations.”

• “In my opinion 2013 is a make or break year for the US. If we are going to get the deficit on a glide path to balance, then it needs to happen this year. (I should note I have been saying 2013 since 2010.) 2014 is an election year, and it will be muy difícil to get anything of substance done then. Will Obama be any more willing to compromise in 2015? At that point I think it is too late and the bond market, having watched Japan and France and much of Europe descend into chaos, will simply begin to demand higher rates, no matter what the Fed does. If it doesn’t happen even sooner.”
• “Japan now has a breathtaking 230% ratio of government debt to GDP (the last estimate I have seen), and it is growing at 10%-plus a year. The government will borrow almost 45% of its budget this year. Has there ever been a more clear disaster in the making?”

Neuberger Berman’s Investment Strategy Group

Forecasts were made in Nueberger’s Ten for '13 published Jan. 22, 2013.

• “We are looking for U.S. real GDP growth between 1.5% and 2%.”
• “As global growth rebounds, we expect investors to begin finding less appeal in safe haven assets such as U.S. Treasuries and German Bunds. Recent, unprecedented tailwinds for these assets … are likely to begin to reverse course as real interest rates inch up, potentially impacting a host of fixed income products.”
• “ We anticipate a reacceleration in Chinese growth from the lows of 7.4% to slightly above 8%, far below historical levels in the low teens.”
• “S&P 500 earnings growth projections for 2013 may decline from current levels of 10%, but we think there is still room for gains through multiple expansion. We have a modest return outlook for equities—consistent with our strategic guidelines.”

Osterweis Capital Management

Osterweis’ Fixed Income Investment Outlook, published Jan. 19, 2013, and Equity Investment Outlook January 2013, published, Jan. 18, 2013, predicted a few benchmarks.

• “At the risk of sounding complacent, we believe that the fundamental trends that produced such favorable results in 2012 are still in place and should support another good year in 2013. … All this leaves us long-term bullish and short-term nervous.”
• “One would expect a back-up in interest rates, as the “risk-on” trade takes hold. Equity, convertible bond and high yield bond markets could rally while Treasury bonds and investment grade corporate bonds should weaken. On the other hand, without sounding too much like a nonplussed economist, if our leaders cannot come to an agreement and we do enter sequestration (read: deeper cuts), we could see rates move even lower on Treasuries and investment grade bonds and “risk” assets plunge.”
• “China’s economic engine has slowed, but recent stimulative actions by its central government may help reverse that.”

PIMCO (Bill Gross and Austin Graff)

Bill Gross gave inflation and interest rate forecasts in his Jan. 3, 2013, commentary, Money for Nothin’ Writing Checks for Free, and Austin Graff gave a GDP benchmark prediction in his Jan. 24, 2013, commentary, “Searching for Growth in a Low-Growth World”.

• “Investors should be alert to the long-term inflationary thrust of such check writing. While they are not likely to breathe fire in 2013, the inflationary dragons lurk in the ‘out’ years towards which long-term bond yields are measured. You should avoid them and confine your maturities and bond durations to short/intermediate targets supported by Fed policies.
• “We expect real GDP to expand by 1.50% to 2.00% in the U.S. and 1.5% to 2.0% globally.”

Pioneer Investments (Sam Wardwell and Ken Taubes)

Wardwell and Taubes looked ahead to market and investment topics for 2013 in their Jan. 24, 2013, Quick Takes on the Investing Year Ahead.

• “GDP growth probably remains around 2% or so for another year as federal fiscal austerity is balanced by strength in the private sector (the Pioneer economics team predicts 2.1%).”
• “Our Global Asset Allocation team is overweight EM equities and underweight U.S. equities.”
• “[Ken Taubes] My view: 3% … still below where they “should” be relative to inflation and nominal GDP growth, but up because Washington didn’t kill us, we didn’t have a sovereign debt crisis, the economy is strengthening, and the Fed has signaled it will take its foot off the gas pedal soon. But the Fed is still holding rates down somewhat.”
• “ China’s economy is turning the corner (recovering), and the EM economies have far more ability to deploy fiscal and monetary policy stimulus than Europe or the U.S. (we’re out of bullets).”

Project Syndicate (Nouriel Roubini)

Roubini’s The Economic Fundamentals of 2013 published Jan. 22, 2013, looked at global market fundamentals for 2013.

• “ By the second half of the year, the investment bust in real estate, infrastructure, and industrial capacity will accelerate. And, because the country’s new leadership – which is conservative, gradualist, and consensus-driven – is unlikely to speed up implementation of reforms needed to increase household income and reduce precautionary saving, consumption as a share of GDP will not rise fast enough to compensate. So the risk of a hard landing will rise by the end of this year.”

Richard Bernstein Advisors (Richard Bernstein)

Bernstein’s overall outlook was focused on a profitable and improving equities market with predictions of inflation, interest rates and currencies, among other topics in his “13 for ’13,” published Dec. 10, 2012.

• “U.S. stocks would continue to outperform emerging markets.”
• “ The long-duration ’wall of worry’ remains very high. Bond portfolios have been consistently short duration relative to benchmark for seven years despite that the 10-year treasury rate has fallen from above 5% to below 2%. Inflows are incredibly strong to short-duration funds. Such overwhelming negative sentiment toward the long-end of the curve argues that long-duration assets are likely to outperform.”
• “Although slack in the global economy may be reduced in 2013, the global economy is unlikely to experience either the credit creation or the bottlenecks that are traditionally necessary to fuel a late-cycle inflationary environment that typically fosters commodity or gold outperformance.”
• “The Japanese Yen will weaken substantially.”

Tocqueville Asset Management (François Sicart and John Hathaway)

Sicart gave a thorough discussion of the markets in 2012 and made a few predictions for 2013 in his Opine Less, Think More, published Jan. 25, 2013. Hathaway gave insight into gold investments for 2013 in his Jan. 11, 2013, Gold Strategy Investor Letter, Q4 2012.

• “In China, the days of 10%-11% GDP growth are probably over. As we had expected, the country never had a recession in recent years, but it is clear that the new norm for economic growth going forward is closer to 8%. The reason is mathematical.”
• “It appears that the government is serious in delivering on its promises, so that various estimates now put Japan’s growth in 2013 at around 2%.”
• “Gold needs to rise only 15% to trade at a new high. We believe that this is in the cards for 2013, and that such a move will be driven by the continuation of negative real interest rates and heightened concerns over the direction of monetary and fiscal affairs in all western democracies. Such concerns will be exacerbated by the continuation of extremely weak economic activity in 2013 and quite possibly the resumption of a recession, anticipated by few.”

U.S. Global Investors (Frank Holmes)

p Frank Holmes discussed gold and emerging markets in a few different commentaries posted in December 2012 and January 2013: “In 2013, Resolve to Follow the Money,” “Invest In Equities: Your Future Self May Thank You,” “4 Sensational Facts About Gold Investing That You Might Not Know.”

• “The combination of fiscal austerity with monetary reflation would keep fueling gold throughout 2013.”
• “The math suggests gold stocks may stage a significant comeback during 2013. Historically, during post federal election years, the Philadelphia Stock Exchange Gold and Silver Index has seen significant gains. … It’s not only the seasonal aspect that drives our bullish opinion toward gold stocks.”
• “Gold should remain a hot commodity in 2013.”

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