Happy Days Are Here Again - Investors Turn More Cheerful On Equities Outlook

Stephen Little

15 April 2013

Fund managers are becoming increasingly optimistic about the outlook for global equities, following a strong start for the equity markets in 2013, and are tipping the US to be this year's star performer, according to a survey by Fidelity Personal Investing.

Fidelity canvassed the investment opinions of 13 different fund groups and found that the positive outlook for the US could be attributed to factors including the discovery of shale gas, a manufacturing resurgence and monetary policy.

Shale gas, obtained from the controversial process of fracking, has become an increasingly important source of natural gas in the US since the turn of the century. In 2000, shale gas provided only one per cent of US gas production. It now accounts for 30 per cent of total gas consumption and the US government’s Energy Information Administration predicts that by 2035, 46 per cent of the natural gas supply will be through shale gas.

“One of the key drivers for the US is the shale gas revolution which is resulting in low energy prices and helping to re-industrialise the US," said Richard Lewis, head of global equities at Fidelity Worldwide Investment.

"Furthermore, the US has always been a champion of innovation and looks set to continue to lead from the front in this area which will further boost the economy,” he added.

Mark Burgess, chief investment officer at Threadneedle Investments, echoed this viewpoint, saying: “We expect a relatively strong US economy, which should see significant benefits from likely energy independence. This favours dollar earners and US cyclical exposure in particular.”

"We anticipate online retailing to grow further and we believe that consumption in developing economies will remain robust, benefiting consumer staple companies, retailers, banks and luxury goods companies,” he added.

Gary Potter, co-head, F&C multi-manager team, highlighted how shale gas was not the only factor creating an optimistic outlook amongst fund managers.

“Quantitative easing and low interest rates, combined with the energy revolution, manufacturing renaissance and a pick-up in the housing market, have provided the ingredients for US GDP to accelerate into 2014,” he said.

Jacob de Tusch-Lec, fund manager, Artemis Global Income Fund, said: "We are playing the US recovery via a number of stocks, all catering to growth in US domestic demand, either via the housing market, general corporate or outsourcing and manufacturing activity. In our view these stocks offer attractive, growing and secure yields, with the potential for good capital growth.”

Income was also highlighted as a popular investment theme among fund groups.

Tom Elliott, global strategist at JP Morgan Asset Management, said: "With interest rates remaining negative in real terms, the focus is likely to remain on income in 2013. UK investors will continue to be forced to look beyond bank savings accounts and government bonds to supply the income they need.”

"This means considering assets that might not previously had been considered by income. The best approach for those in need of income in 2013 may well be to consider the risk and go abroad,” Elliott added.