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We offer our global macroeconomic and fixed income market outlook for 2014, with our views on growth, inflation, and interest rates. We believe carry-over factors from 2013 to the first half of 2014 will include a continuation of the modest-growth, subpar economic recovery since 2008, low inflation, and additional, though reduced, central bank stimulus. Interest rates appear to be on a normalization track, dependent on economic data and monetary policy decisions. In fixed income markets, relative values and our outlook favor municipal and short-duration inflation-indexed investments.
Despite strong results in many global markets, investors weathered some challenges in 2013. In 2014, we expect global economic growth to continue slowly, which should create opportunities for global stock investors.
As growth stock investors, we focus on companies that exhibit accelerating growth rates in revenues and earnings, which allows us to identify companies at an inflection point in their development. We are particularly interested in companies we see as marketplace disruptors, entities that are making significant inroads in larger, more established markets.
While high interest rates and inflation have historically been detrimental to stocks, we believe our higher quality bias may moderate downside risk in the event of a less robust market. As the Federal Reserve has gradually introduced the idea of tapering its bond-buying activities--the three-stage program known as quantitative easing--the focus from lower quality to higher quality businesses is potentially in play, which could shine a favorable light on our value security selection process.
In previous CIO Insights, we discussed how corporate earnings quality and growth are two of the "four basic food groups" of our disciplined equity investment process, along with value and share price momentum. In this edition, we'll discuss how our use of momentum has evolved over time and differentiates us from other investor.
We believe the economic and market environment heading into 2014 will be more favorable for individual stock selection processes than at any time since the 2008 Financial Crisis.
The opinions expressed are those of the individual investment managers and are no guarantee of the future performance of any American Century Investments fund. This information is for educational purposes only and is not intended as investment advice.
Statements regarding specific holdings represent personal views and compensation has not been received in connection with such views.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.
Historically, small- and mid-cap stocks have been more volatile than the stocks of larger, more established companies.
Diversification does not assure a profit nor does it protect against loss of principal.
Generally, as interest rates rise, bond values will decline. The opposite is true when interest rates decline.
Past performance is no guarantee of future results. Mutual fund investing involves market risk. Investment return and fund share value will fluctuate. It is possible to lose money by investing in mutual funds.
For detailed descriptions of any index referenced above, refer to our Glossary.