Fortune recently held a roundtable with five investing experts who were of the opinion that the US offers fresh investment opportunities. They discussed how investors have realized that the credit bubble was not only a US event; there was a huge one in Europe too. So the “US is the shining star here since it has gone through a lot of the deflation of the bubble already,” is how one of them put it. Another observation was that the prices of US stocks have factored in the bad news and the market has fared better than virtually any other place in the world by going down less. Basically, the best house in a bad neighbourhood.
Clare Hart, executive director at JP Morgan Asset Management, was quoted in This Is Money, part of UK-based Daily Mail saying: “A significant number of companies are doing well selling into the global market. US companies, bolstered by record profits and significant cash hoards, are increasing their dividends at the fastest pace in seven years.” Growing at 2 per cent a year; the US is better off than Europe. Corporate earnings were up 15 per cent in the third quarter of 2011. A lot of the negatives are already priced into the market and stocks are available at great bargains. Strong, cash-rich companies are poised to grow.
According to William Goetzmann, economic historian at Yale University, the US market has survived two world wars, a Great Depression, severe inflation and political unrest. So the optimistic view is that the US economy will navigate this current tumult with no lasting damage. Last year, a columnist at Business Week commented on his views and made a statement which should grab a contrarian investor’s attention: “There’s no guarantee, of course, but a return to the historic range of a 4 per cent to 5 per cent equity premium translates into a 30 per cent to 40 per cent gain in the S&P 500.” The author concluded by saying that the odds favor a US economy with innovative chapters yet to be written. Diversifying your investment portfolio geographically may be a good idea.
This article was originally published on February 16, 2012.
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