First Citizen’s investment chief sees stock gains of 4.6% over next 5 years

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Brent CilianoFirst Citizens Bank

Brent Ciliano

One of North Carolina’s biggest money managers thinks investors are likely to earn average annual returns of 4.6% in stocks and 2.5% in bonds over the next five years. That limited growth is likely even though there are no signs of a recession, says Brent Ciliano, who oversees $20 billion as chief investment officer at Raleigh-based First Citizens Bank. He offered his outlook earlier this week at Business North Carolina’s  NC CEO Summit in Pinehurst.

That performance is weaker than the annualized gains of the last 20 years, during which the S&P 500 gained about 420%, he says. If such limited gains occur, pension plans and endowments expecting annual returns of 7% to 8% to pay retirees and make charitable investments may face a rude awakening, Ciliano said.

Here are some of Ciliano’s key comments:

Four predictions for 2018:

– U.S. equities will gain 6% to 11% this year. (Returns will be more lackluster in 2019-2022.)

– Global non-U.S. equities will gain 9% to 14%.

– Taxable bonds will lose as much as 3% as interest rates rise.

– Municipal bonds will show real returns of 2% to 5%.

 

U.S. corporations, on average, are in the best financial shape in 80 years.

By the end of 2018, it will be the second longest economic recovery, trailing only the growth experienced from 1991-2001.

Still, nearly a third of Americans have zero or negative net worth.

The wealthiest 0.1% of Americans collectively have the same wealth of 90% of the U.S. population.

 

Last year marked the least volatility in the stock market since 1929.

Still, only five of 30 asset classes outperformed the average gain in 2017, a trend that has continued into this year.

Five stocks — Alphabet, Amazon, Apple, Facebook and Microsoft accounted for more than 50% of the S&P 500’s gains last year.

But volatility has returned. More than a third of trading days in 2018 have involved gains or declines of at least 1%

Six key drivers of the  stock market gains: easy money, strong corporate profits, solid economic data, confident consumers willing to spend, pro-growth fiscal policy and TINA, which stands for  “There is no alternative” to owning stocks.

Don’t try to time the market. The only reason to not hold stocks is if one needs the bulk of your money in less than five years.

 

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