IE Conjecture podcast: Discussing US Equities
Politics and yield curves remain challenging, but 2013 could shape up to be a more “normal” year for investors in US equities, according to views expressed in the recent InvestmentEurope Conjecture discussion – now available on demand.
Mike Kagan, co-portfolio manager on the Legg Mason Clear Bridge US Appreciation Fund, and Alec Young, global equity strategist atS&P Capital IQ, gave their views on the outlook for the asset class.
Although the so-called fiscal cliff is a much discussed matter, Kagan and Young highlighted another danger, which is the introduction of much higher capital gains tax rates, which are theoretically possible under the fiscal law that end a number of Bush-era tax reductions.
The low real interest rate level set by the Federal Reserve, and other macro clouds, also remain as ongoing challenges to equity investors, but Kagan and Young believe that the US has a number of options open to it – not least on the basis that there is actually a considerable amount of wealth in the country still, which could be harnessed should the worst – such as a collapse in demand for Treasuries happen.
Technically, there is not problem of liquidity in the equity market, and correlations have widened between individual stocks and broader index measurements such as the S&P 500, which suggests active managers have more scope to find companies that can produce better returns.
And, after the lesson learned by the market in 2012 so far – that is, not to fight the Fed or ECB – then 2013 is shaping up to be a more “normal” year for investors once the near term events, such as the presidential election, are over, the Conjecture panellists suggest.