Opportunities remain for US equity investors
Despite some degree of economic deterioration, there are still exciting opportunities to be found in US equities.
Various economic indicators point towards a deteriorating economic backdrop in the US, for example, unemployment has hit 5% and the Institute of Supply Management (ISM) Manufacturing Report on Business has dropped to 47.7 – readings below 50 imply negative overall business sentiment. The US equity market has also recorded its weakest start to a trading year since 1932.
However, Cormac Weldon, head of US equities at Threadneedle, has highlighted opportunities in several pockets of the market, including within financials. “We are just starting the reporting season and there are going to be some big write downs from the banks,” he said. “It is still too early to start buying the sector indiscriminately, but there are some instances where all of the possible bad news and more is reflected in prices, and we have been taking advantage of those.”
Weldon is also optimistic about the outlook for 2008. He explained: “Interest rates are falling and we are finding lots of companies with strong balance sheets and healthy cash flows that are well positioned to weather the tighter credit conditions we are witnessing.”