Multi-Manager

Our views on the US

The US market has outperformed but recent data highlights growth is slowing.
March 2019

Risk Disclaimer

Please note that this is a marketing communication and does not constitute investment advice or a recommendation to buy or sell investments nor should it be regarded as investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. Views are held at the time of preparation.

Past performance is not a guide to future performance. Stock market and currency movements mean the value of investments and the income from them can go down as well as up and you may not get back the original amount invested.

The US economy appears to be on a sounder footing than many of its western peers. But recent data highlighted that growth is slowing. With the lagged impact of rate rises (the most recent hike being December 2018) feeding through to economic data over the coming months, and a wider slowdown taking place across developed markets and China, we believe the US economy will slow further over the year.

US shares have outperformed

Source: BMO Global Asset Management as at March 2019

Recession risk

A recession still looks unlikely without an economic shock. However, it’s worth noting that the scale of the recent monetary tightening has historically been sufficient to push the economy over the edge.

A key theme that will drive both sentiment and the market over the year will be whether the Fed has gone too far or has been able to engineer a ‘soft landing’. Evidence that the US is headed for a soft landing will probably see markets move higher. Conversely, further disappointing data poses risks to the current rally, not least given the strong rebound in markets since Christmas, which has been driven by more dovish talk from the Fed rather than a pickup in the economic data.
 

Focus on earnings

Earnings need to be watched closely – after growth above 20% in 2018, boosted by a strong economy and significant corporate tax cuts, this year will see slower growth, and companies that miss already downgraded expectations are likely to see their share prices suffer.
 

Politics

We expect political noise to remain elevated as attention begins to focus on the 2020 presidential election. President Trump, ever mindful of stock market levels, will likely continue to put pressure on the Fed not to raise interest rates – he does not want to fight the next election against a weaker economic backdrop.
 

Trade tensions

We’re hopeful the US will reach a trade deal with China, which would boost sentiment and those industries that benefit from increased Chinese buying. Trade issues will not disappear, however, with President Trump expected to pursue perceived injustices with Europe and Japan, particularly around auto imports.

Risk Disclaimer

Please note that this is a marketing communication and does not constitute investment advice or a recommendation to buy or sell investments nor should it be regarded as investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. Views are held at the time of preparation.

Past performance is not a guide to future performance. Stock market and currency movements mean the value of investments and the income from them can go down as well as up and you may not get back the original amount invested.

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