Economic growth in the United States and overseas will remain tepid for several years before returning to historical norms, with fixed income returns staying low to the point of offering little or no return above inflation. Equities are not expected to be hurt as much as fixed income as more meaningful growth eventually resumes. These are two of the primary conclusions of Wilmington Trust's 2011-2017 Capital Markets Forecast, the new installment of the company's annual long-term outlook for the financial markets.

?The global economy is continuing to recover slowly from a severe financial crisis,? said Rex Macey, CFA®, CFP®, CIMA®, senior vice president and chief investment officer for Wilmington Trust's Wealth Advisory Services (WAS) business. ?As a result, we see lingering weak economic growth and low inflation for several years to come. Toward the end of our forecast period, we expect growth to accelerate, which should be accompanied by an increase in interest rates and inflation.?

The forecast, which is produced by Wilmington Trust's Investment Strategy Team, underscores the importance of diversification among a variety of asset classes, including global equities, real assets (commodities, inflation-linked bonds, and real estate), and hedged strategies. This year's edition calls for inflation to rise averaging about 1.5% annually, or roughly half of its historical level, given the current low inflation environment, excess capacity, and high unemployment. It also introduces an allocation to quality, income-oriented equities for some investors and sees continued relatively brighter expectations for non-U.S.-based equities.

Income-oriented and international equities favored

Quality income equities will produce more income over our forecast horizon than bonds, but investors will have to tolerate the additional price volatility associated with stocks, Mr. Macey said. ?We describe income as ?quality' if investors can be reasonably confident that the income stream, generally in the form of dividends, can continue for an extended period.?

In addition, Wilmington Trust's expectations for international equities, both in developed and emerging markets, are higher than those for U.S. equities, though they are still modest compared with historical returns over the long term. As a result, the company is recommending a greater commitment to international equities in many client portfolios. ?Broad indices of developed and emerging international equity markets have been fairly consistently outperforming broad indices of the U.S. equity market for many years,? Mr. Macey added. ?We project that international equities will continue to outperform over the next seven years, albeit with greater volatility than the U.S. market.?

Struggles ahead for fixed income

Fixed income securities will likely have to endure a period of diminished returns, especially for cash equivalents and inflation-linked bonds, which are going to struggle to produce any positive real yields, Mr. Macey said. The outlook for investment-grade, nominal bonds – those whose prices are not indexed to the rate of inflation – is also subdued. ?There may be a relatively small silver lining for municipal bonds, whose taxable-equivalent returns should exceed those of taxable bonds, especially in light of the great likelihood of increasing marginal tax rates. But both categories are apt to disappoint large numbers of investors who use historical returns as a benchmark for likely future returns.?

Wilmington Trust's Wealth Advisory Services business offers a comprehensive array of personal trust, wealth planning, fiduciary, asset management, and family office services that help high-net-worth individuals and families grow, preserve, and transfer wealth. WAS maintains offices in many key high-net-worth markets throughout the United States and serves families with whom it can build long-term relationships, including many that have lasted for several generations.

Mr. Macey is a member of Wilmington Trust's Investment Strategy Team and Investment Research Team. He holds an MBA from the University of North Carolina's Kenan-Flagler Business School and bachelor's degree from Vanderbilt University. He is an instructor for a CFA review course sponsored by the Atlanta Chapter of the CFA Institute. He chairs the editorial advisory board for Investments & Wealth Monitor, a bi-monthly publication of the Investment Management Consultants AssociationSM (IMCA®). He has twice received IMCA's Stephen L. Kessler Writing Award for editorial excellence, most recently in 2010.

About the Capital Markets Forecast

Each year, Wilmington Trust's Investment Strategy Team (IST) undertakes a multi-year forecast of financial market performance. In preparing the forecast, the IST is concerned primarily with valuations. Implicit in its approach is the idea that extreme evaluations tend to revert, over extended periods, toward long-term, historical averages. In making tactical asset allocation recommendations, the IST considers not only its impressions about valuations and forecasts for longer-term market performance, but it also considers shorter-term trends in securities prices. Ultimately, its tactical recommendations reflect the collective judgments and expectations of team members. The IST aims to deliver higher-than-benchmark total returns for investors with varying appetites for risk.

About Wilmington Trust

Wilmington Trust Corporation (NYSE: WL) is a financial services holding company that provides Regional Banking services throughout the mid-Atlantic region, Wealth Advisory services to high-net-worth clients in 36 countries, and Corporate Client services to institutional clients in 89 countries. Its wholly owned bank subsidiary, Wilmington Trust Company, which was founded in 1903, is one of the largest personal trust providers in the United States and the leading retail and commercial bank in Delaware. Wilmington Trust Corporation and its affiliates have offices in Arizona, California, Connecticut, Delaware, Florida, Georgia, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, Pennsylvania, South Carolina, Vermont, the Cayman Islands, the Channel Islands, London, Dublin, Frankfurt, Luxembourg, and Amsterdam. For more information, visit www.wilmingtontrust.com.

Additional media contacts:
DAI Partners
Angela Dailey, 714-322-7202, dailey@daicommunications.com
Elizabeth Powell, 202-248-1186, powell@daicommunications.com

CFA® and Chartered Financial Analyst® are trademarks owned by the CFA Institute. CFP® and Certified Financial Planner® are trademarks of Certified Financial Planner Board of Standards. IMCA® and CIMA® are registered trademarks and Investment Management Consultants AssociationSM and Certified Investment Management AnalystSM are service marks of Investment Management Consultants Association Inc.

Journalists may obtain a copy of Wilmington Trust's 2011-2017 Capital Markets Forecast, which includes detailed analysis of potential risk and returns of various asset classes and historical performance data on Wilmington Trust's investment strategies, from the media contacts shown above.

The information contained herein is not intended to be an offer or solicitation for the sale of any financial product or service or a recommendation or determination by Wilmington Trust that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the investor's objectives, financial situation, and particular needs. Investment products are not insured by the FDIC or any other governmental agency, are not deposits of or other obligations of or guaranteed by Wilmington Trust or any other bank or entity, and are subject to risks, including a possible loss of the principal amount invested. Some investment products, including hedge funds, may be available only to certain ?qualified investors? – that is, investors who meet certain income and/or investable assets thresholds. Past performance is no guarantee of future results.

Wilmington Trust Corporation
Bill Benintende, Public Relations
302-651-8268
wbenintende@wilmingtontrust.com
or
Megen Morris, Public Relations
302-651-1462
mmorris@wilmingtontrust.com