The head of US large cap said next year would be a stockpickers’ market as the ‘wall of worry’ over the economy and financial system looked set to be less of a concern than this time last year.
While actions from the Fed and central banks could undermine that view, US equities still remained inexpensive when compared to bonds, she said and if bond returns turned negative, it would benefit equity markets.
Shatney said next year was showing potential for 8-10% earnings growth, which implied a 10-15% overall return for US large caps although she caveated that earnings growth on the upside could see the market exceed these double digit returns.
"While this would represent a more modest return compared with the 26% or more we have seen thus far in 2013, we believe it means the US offers a significantly better risk/reward balance than other developed equity markets," Shatney added.
She suggested that while margins were close to peak for many companies in the S&P 500, across sectors, there was room for margins to move higher.
"We believe that improved cost controls, increased pricing power, and the ability to spread operating costs across higher sales could enable companies to drive margins above their previous peak."
