Dan Heckman on the Investment Forecast: Slow and Steady

Investment Forecast: Slow and Steady Wins the Race – “Slow but improving growth as we move through 2013.”

Sluggish growth, decreased unemployment and more investors re-engaging in the stock market in different ways are all trends to be expected in the third and fourth quarters of 2013 and into 2014, according to Dan Heckman, a Kansas City-based national investment consultant for The Private Client Reserve of U.S. Bank.

We will see “slow but improving growth as we move through 2013 — both globally and domestically,” Heckman says. “Improving growth in profits and an improvement in unemployment rates [is] also likely.”

Those wanting to jump back into investing have a few areas to consider. Heckman believes that there are a few key industries that investors should be on the lookout for in terms of providing the most growth.

“We believe the leader will be the sector of consumer discretionary stocks,” Heckman says. “Retail sales have been strong in recent months due to the gradual improvement in employment trends and solid growth in home prices. For many consumers, their home is their largest financial asset and in most areas of the country, this asset is now gaining value for the first time in the last five or six years. Many of the companies that serve consumers are well positioned to benefit from the re-engaged American consumer. Assuming no spike in oil or gasoline prices due to geopolitical conflict in the Middle East or North Korea, we feel the consumer is well-positioned to be a constructive driver of the U.S. economy.”

Clients around the country are beginning to look for new places in which to gain income.

“Many of our clients that were exclusively bond investors are now looking at other areas of the market for income,” Heckman says. “Many investors have turned to equities for income. 3–4 percent dividend yields are common for many stocks at this time.”

“Additionally, unlike bonds, many companies provide a dividend increase annually, which helps investors stay ahead of inflation. We view tax-exempt bonds as attractive. We feel tax rates for individuals have a good chance of moving higher over time from current levels. Further, municipal bonds offset this trend.”

Clients in the Midwest region and greater Kansas City have several specific considerations regarding wealth management and financial decision-making. Heckman cites a growth of wealth that is associated with farmland and agricultural activities, which he believes will continue to remain for a while.

“Businesses associated with large holdings of land and/or farming would be subject to high estate tax rates, which should be considered when estate planning decisions are made,” Heckman says. “A lack of planning in this area can subject a family to high tax rates and a diminished legacy.”

Overall, economic growth is forecasted to be slow but steady, and the stock market is also improving. But Heckman points out the growth is not rapid, but this is considered “an improving trend.”

“The equity market responds well to this improving trend as well as the very accommodative stance/actions of the Federal Reserve and other central banks, very low interest rates and low inflation. Balance sheets are very strong and liquid and dividend growth is rapid. The S&P 500 established a record high in terms of reported profits in 2012 and is very likely to set another record in 2013. Dividends paid are also at all-time highs.”