This follows news earlier in the week that US consumer confidence has hit its highest level since before the credit crisis in 2007, and the S&P 500 broke through the 2000 point for the first time.
“These figures confirm the strength of the US economy, and judging by recent figures, it is not going to run out of momentum any time soon,” said Nancy Curtin, CIO at Close Brothers Asset Management. “Consumer confidence is at a seven year high, home construction data has bounced back and manufacturing figures continue to exceed expectations,” she added.
Curtin said that while ‘sluggish’ wage growth remains a key consideration for the Fed, employment numbers continue to show the strength of the US labour market. “As improving economic conditions on the ground support company earnings, it will underpin the long-term outlook for US equities,” she added.
The ‘cloud on the horizon’ as Curtin see it however, is the inevitable monetary tightening from the Fed, although that may well be some way off still. “While Janet Yellen’s language may suggest the Fed is inching towards interest rate normalisation, this is not likely to be imminent, especially as we have yet to see the end of tapering,” she said.
Patrick Moonen senior equity strategist at ING IM saw reason to be confident on US stocks in the numbers seen his week. “US companies are delivering sufficient earnings growth to push the S&P500 further beyond the psychologically important 2000 level, which was breached intra-day earlier this week,” he noted.
“The future direction of the S&P 500 will primarily depend on the growth in earnings but fortunately, Q2 earnings data shows this growth is coming through as a result of a strong economy,” Moonen added.
“The actual price/earnings ratio is unlikely to move significantly higher though as the Fed continues its gradual move back towards monetary normalisation,” he cautioned.
