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Market Views - Economic Outlook 2013

Outlook 2013

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


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You should carefully consider the investment objectives, potential risks, management fees, and charges and expenses of the Fund before investing. The Fund's prospectus contains this and other information about the Fund, and should be read carefully before investing. You may obtain a current copy of the Fund's prospectus by calling 1-800-995-2637 or click here to view or download a prospectus online.

Mid, Small and Micro Cap investing involve greater risk not associated with investing in more established companies, such as greater price volatility, business risk, less liquidity and increased competitive threat. Fund holdings and sector weightings are subject to change without notice. Past performance is no guarantee of future results.
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