That the US market has been volatile recently is undeniable. Quite where it will go is more difficul...
That the US market has been volatile recently is undeniable. Quite where it will go is more difficult to predict.
"It's a very tricky time," says Simon Laing, manager of the Newton American fund. "I think you could make a good case for the market dipping as well as a good case for it going up. I think after the summer things should be a lot clearer."
Fund managers across the board are being similarly wary. Like Laing, Greg Kerr, manager of the New Star US Opportunities fund, is avoiding cyclical companies in case of an economic slowdown and plumping for more stable stocks instead. Almost all are avoiding the financial sector.
Kerr is particularly keen on technology companies at the moment because of their steady growth and low levels of debt. He is also overweight on global energy stocks.
Renewable energy is another area to watch. "It is clearly a growth sector but there is uncertainty over the business models and its future has a lot to do with politics," says Kerr. Corn prices have soared recently as ethanol production has taken off and Kerr has investments with Archer Daniel which is involved in corn processing and refining.
Open to debate is the fate of house-building stocks. Kerr believes the property sector offers some good bargains at present. "At the moment, the prices are reflecting short-term concerns," he says. "Any stock with a whiff of sub-prime about it has fallen dramatically and is currently under-rated. There are good opportunities for a long-term investor and I think we will see favourable returns within the next three to five years." Laing thinks otherwise and says: "The housing sector ran so hard for five years but it is unlikely to really improve."
In times of market volatility, pharmaceutical stocks are traditionally seen as a safe option providing solid (albeit not stellar) returns but this could be about to change. Kerr says: "The pharmaceutical pricing regime is in question at the moment - Hillary Clinton in particular believes they have been overcharging - and if the Democrats get in, they may well have their future profits dented."
Bob Doll, vice chairman of BlackRock, remains optimistic on the US economy. He says: "It is important to remember that the job market and income levels have continued to hold up. Additionally, economic growth remains robust outside of the US [which] should help the US economy achieve the much-hoped for "soft landing".
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