Fresh from my own brief stint across the Atlantic, I see truth in both assessments. Anyone who has ever fought their way through Times Square will recognise its brash luminosity as the embodiment of capitalism; something that has stirred up the many protestors in both cities in recent months.
Here in Blighty, so uncomfortably close to the crisis engulfing Europe, the feeling of imminent doom is palpable. With bank balance sheets still some way from recovery, the warnings this week of a further financial crisis seemed inevitable. Step outside central London, and the struggles in the retail sector are clear to see with vacant units on every high street.
The States too has its own problems of course, but what struck me from my admittedly short trip was a sense of buoyancy from New York’s working finance professionals.
As I reported yesterday, renowned economist Nancy Lazar from International Strategy & Investment (ISI) told of a “cleaned out” financials sector, and a “resilient” private sector driven in part by a “manufacturing renaissance”, where US-based companies are now able to compete on a level footing with China. This is despite her gripes about lack of fiscal reform, which arguably could well be remedied (or indeed made worse) with a change of personnel in the White House in 2012.
Cash levels on the rise
My host in New York was Schroders, and its fund managers too seemed to share this cautious optimism. Joanna Shatney, head of US large cap equities, sees US corporates as being well positioned to drive earnings growth in a slow global growth environment. She pointed to strong balance sheets across the board; and while companies are under-investing their cash levels are on the rise.
Could this lead to a new M&A boom? Further down the cap scale, Jenny Jones, head of US small and mid cap equities, has certainly seen a pick-up in corporate activity with M&A running ahead of last year’s pace so far in 2011.
Jones herself came across as less bullish than Shatney with real concerns at how markets are still very much driven by the macro. However, while Q3 2011 may have been the worst quarter on record for the Russell 2000, optimism, she noted, comes from a dramatic rebound in the fortunes of the index in October.
What is clear then is that the US remains a mixed bag – the sheer size of the country, not just New York, proves this – and its equity markets are an embodiment of this. Invest now, and there is more uncertainty than ever as to where the S&P 500 or Russell 2000 will be in 12 months time. But, with sentiment towards high growth emerging markets having cooled, you’d have to argue that the US from here looks the best bet for returns from the major markets in 2012.
