Summit speaker addresses strong dollar, investing at home

An investment summit hosted Wednesday by a division of Commerce Bank highlighted the state of the global economy and tied it with financial decisions that need to be made at home.

Scott Colbert, a senior vice president, chief economist and director of fixed income for The Commerce Trust Co., was Wednesday's keynote speaker at the event, which included about 85 business and community leaders during a luncheon at Isle Casino Cape Girardeau's event center.

Colbert, of St. Louis, manages a multibillion-dollar fund for the trust company and presented a "2015 Outlook for the Financial Markets," which sought to answer questions about the strength of worldwide and United States' economies, the potential for rising interest rates and where to invest money in the coming year.

Colbert said a smart decision for investors would be to invest domestically instead of internationally because of the growing value of the U.S. dollar.

"The value of our stocks and bonds are going up relative to the rest of the world," he said. "Stay here, keep your money home until this changes."

He also spoke on how interest rates -- which may go up this year -- relate to the pace at which the economy continues its rebound since the recession.

With interest rates low, "on home mortgages, the couple hundred bucks less people paid every month helped get them through the downturn," Colbert said, and it has been the same for large businesses that have refinanced debt at low interest rates.

"That money just drops to [companies'] bottom line. Their earnings grow, their asset values grow, your 401k grows, the business is more confident and then they start to invest in a plant, or capital equipment. Then the last thing they do is hire somebody," he said, pointing to the need for more job growth in the country so the economy can keep improving.

"The lower [interest rates] stay for longer, the faster we can grow," he said.

The Federal Reserve sets the benchmark interest rate, which has been near zero for several years, making interest more affordable on new and refinanced loans.

Colbert said he believes a rise of the benchmark rate may happen this year, possibly as early as June. A recent meeting of the Fed, however, indicated policymakers aren't ready to start raising rates soon, with some expressing concern about excessively low inflation, lingering weakness in the U.S. job market and economic threats overseas, The Associated Press reported Wednesday.

The effect of interest rates on stocks, said Colbert, is something investors should watch.

A "presidential cycle" trend for stocks also seems to be working again, Colbert said, referring to a market pattern historically seen over a four-year term of a U.S. president. The third year of a term, which has begun for President Barack Obama, can be the best time to invest in the stock market, many financial advisers believe.

Colbert's objective for the presentation was to communicate four things

• "The U.S. economy is doing exceptionally well ... better than most people know," he said;
• "The economy can decouple from some headwinds that are coming from around the globe," such as the effect of a slowing Chinese economy and the European recession;
• The U.S. has a much stronger currency, which makes for a U.S.-centric thought process encouraging domestic investments as opposed to international investments and;
• Stocks, if handled correctly, are preferred for investments over bonds because bonds aren't yielding high returns.

Bank representatives said the reason for the event is so they can earn new business, build better relationships with clients and help people connect what's happening globally to what happens locally.

eragan@semissourian.com

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