A presidential opportunity as corporate America positions to take advantage of global growth
The prime minister’s recent trip to the US has put the spotlight on the forthcoming US presidential election later this year.
Irrespective of who wins the right to battle Barack Obama for the presidency, the importance of providing the foundations for a more stable and sustainable US economy remains. Data from the US suggests that the recovery enjoyed recently may be beginning to gain some traction. US first-time claims for jobless benefits fell to a four-year low as the private sector added more than 250,000 jobs in January. The overall employment rate has fallen close to the 8% mark President Obama targeted when he announced the first stimulus package.
Following the US Federal Reserve’s confirmation that interest rates could stay at record lows for more than two years, stock markets have surged.
Signs of improvement
"Certainly the economy seems to be improving," says Howard Gleicher of Aristotle Capital Management, lead investment manager for the St. James’s Place North American fund. "If you look at practically any indicator – employment, consumer confidence, bank lending – things have been improving, while inflation is running below expectations."
But is this improvement in the economy reflected in the position of corporate America? "Corporate profits have been relatively strong, though to date this has been more the result of cost-cutting than revenue growth." Gleicher notes that: "corporate profits are growing at near 6% and we expect them to produce high single- or double-digit gains over the next couple of years.
"If you look at the S&P 500, about 60% of those companies’ earnings are generated outside the United States. Increasingly these are global businesses able to use cash cows from US or European sources to grow elsewhere. We see that as attractive over the long term."
View this week's Market Bulletin to find out more.
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