Kenneth Taubes, chief investment officer of US Investment Management at Amundi, assessed in its last 2018 outlook note that significant events occurring in the US are not fully priced into the market currently.
Taubes said the agreement on tax reform enshrined at the end of 2017 and the expected infrastructure spending boost are likely to benefit the US economy for the coming 12-18 months.
“They will likely bring a rotation towards a cyclical domestic focus and could be particularly positive for financials, consumer discretionary and domestic companies,” he argued.
“We like multinationals with large cash repatriations. Looking into 2018, we believe that the concerns about a bubble for US equities are overdone. Compared to past crises (2000, 2007), we don’t see excess in terms of flows. M&A will likely revive and support the market now that the tax reform has been legislated. Financial conditions are still benign,” said Taubes.
Amundi’s US investment management CIO added the firm expects that the combined impact of an improving US economy, a stronger global economy and lower taxes will support earnings per share growth.
“Due to high valuations, earnings growth is important to support the market. As certain stocks are overvalued, a rigorous bottom-up security selection will be key,” Taubes outlined.
Amundi has €1.4trn in assets under management.