If you think America's recovery could be stronger, you have some sophisticated company.
Rebecca Patterson, Bessemer Trust's chief investment officer, says the U.S. economy could surprise investors with more upside in 2014 and grow "comfortably above" 3 percent this year, compared with the Bloomberg economists' consensus of 2.6 percent for 2014, and the 1.7 percent growth the United States is expected to report for the year just ended.
Why? She attributes better forecasts in part to lower oil prices, in particular oil's falling below $100 a barrel.
"Oil may come down because of relatively better geopolitical tensions, but also technological advances in fracking and horizontal drilling," Patterson says from her New York headquarters. Bessemer also has a large office in Wilmington.
America has imported less oil and gas over the last few years, and as a result, "we're paying less because we produce more at home," she says. "We as Americans will have more disposable income that doesn't go into the gas tank or heating our homes."
In Bessemer's most recent asset allocation for a balanced growth portfolio, the firm is targeting the following: 60 percent stocks and 24 percent bonds, 2 percent in commodities, and the remainder in "strategic opportunities" - emerging-market debt, bank loans, and some trading in options, such as puts and calls. Rather than buy a stock outright, puts and calls allow investors to wager on the price direction of the stock, and provide the option to then buy or sell later.
For instance, in 2012, Bessemer was buying call options on the Japanese stock market ahead of the national elections there. The position was a big winner for clients, and, she recalls, "I wish we had bought more."
Currently, "we are shorting [betting the price will fall] the yen through this opportunistic portfolio. We see the yen vs. dollar trading" at 115 yen to one dollar, Patterson said.
She said the level might not happen in 2014, but is headed in that direction. The yen's weakness is calculated partly because of the Japanese central bank's aggressive monetary stimulus, which, Patterson adds, "makes the U.S. Fed look shy" in comparison.
Among emerging-market stocks, Patterson is avoiding Brazil, Turkey, India, and South Africa "until elections are over in those countries. We don't get paid to be brave. My investors don't want me to take a bet on elections."
She advises waiting for those electoral outcomes, and for investors to "be patient."
On the other hand, Mexico's stock market could benefit from a better-than-expected recovery, Patterson said.
When investing in commodities, Patterson prefers palladium and platinum to gold. Those metals move in tandem but platinum and palladium have more industrial uses, such as in catalytic converters.