National Penn Investors Trust Company president tells clients recovery will continue, but warns of potential harm from Congress

James King, president of National Penn Investors, urges patience in an uncertain time.

The economic recovery is not over, recent dismal reports notwithstanding, but a wealth manager says investors seeking returns need to be patient.

James King, president of National Penn Investors Trust Company, told clients Tuesday that the United States remains financially healthier than most global counterparts, but key headwinds are preventing a more robust recovery.

Among those King listed soft consumer spending, crushing student loan debt, and a housing market that is improving only slowly. Against that backdrop is the uncertain outcome of fiscal showdowns in Congress.

“These issues are huge,” King said to about 65 attendees at Saucon Valley Country Club. “We’re making progress on most of these issues, but the issues are so huge and the progress is so slow, you need to be patient.”

King oversees about $2.6 billion in assets among some 2,500 clients served by National Penn Investors Trust, where he is also chief investment officer. The business is part of the wealth management division of the National Penn banking company that owns KNBT branches in the Lehigh Valley.

King said stocks are still the best long-term bet for most investors but advised limiting international investments until the debt crisis in Europe resolves.

Jim Yeager, a retired manager of Dorney Park & Wildwater Kingdom and a client of National Penn, said he worries about tax hikes and spending cuts scheduled to occur unless Congress acts.

"Fiscal cliff"

Without new legislation, tax cuts enacted under presidents Bush and Obama will expire Dec. 31 while broad spending cuts authorized last year by a congressional super-committee kick in.

Yeager, a Macungie resident who said he depends on his portfolio to plan his retirement, said he is unsure how the market would react to such a drastic change.

“Last year was a decent year,” Yeager said of his stock and mutual funds performances. “Hopefully, it continues.”

King said the dual impact of higher taxes and less spending would hurt already fragile economic growth. He said the solution is for Congress to act before country falls off a “fiscal cliff.”

“At the end of the year, if nothing is done, the world is going to change,” King said. “A concern of ours is the combination of tax increases and spending cuts happening at the same time could have a very pronounced effect on GDP growth, possibly a 1 to 1.5 percent reduction.”

Gross Domestic Product — a broad measure of the nation’s economic growth — needs to increase at 3.5 percent quarterly to provide strong momentum, King said. The U.S. economy grew at only 1.9 percent in the first quarter, revised down from an initial estimate of 2.2 percent.

That and weak jobs reports have fueled anxiety about the strength of the recovery.

King said conditions are vulnerable because consumers have just begun to rebuild confidence after several years of paying debt that was run up before the crash of 2008. Consumer spending accounts for about 70 percent of economic activity.

“We need each of us going out there and buying stuff in order to promote growth,” King said.