Investment Strategies

Investment Comment: Investors Should Look To US For Signs Of Recovery

Eliane Chavagnon Reporter 21 June 2012

Investment Comment: Investors Should Look To US For Signs Of Recovery

Investors should note that although the US was the first to fall into a recession, it will “lead the way out” with a strong outlook across a number of sectors, according to Mike Corcell of RWC Partners.

The US logged 2 per cent GDP growth in Q1 2012, compared to a flat growth rate for the eurozone, and the S&P 500 is currently trading at 12 times forward earnings, compared to the 10-year average of 14.6, he notes.

Corcell, manager of RWC’s US Absolute Alpha fund, believes the US banking system is “stronger and less constrained to promote lending and growth” than its European counterparts. US banks grew by 4 per cent in Q1 compared to 1 per cent within the European Central Bank region.

“This year has provided the opportunity to benefit from a strengthening US economy, although it has been essential to avoid the pockets of volatility created by uncertainty emanating from Europe,” Corcell said. “We do believe that structurally the US is well placed to emerge from the crisis ahead of other regions.”

Another reason why investors should turn to the US is because its housing market is “in the process of healing after the worst downturn in 50 years,” with US homebuilders seeing order growth of 25 per cent in Q1.

“In addition, a view that China is slowing more rapidly than investor perception has allowed us to capture gains with negative positions in mining equipment suppliers and oil service providers,” added Dan Mannix, head of business development.

“Overall, we are tactically cautious as we deal with geopolitical instability but optimistic about the US market overall as it trades in 13 times more earnings with record low treasury yields and a firm backdrop for corporate profits,” he said.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes