Despite the US market hitting new highs earlier this year Fidelity Worldwide Investment chief investment officer Dominic Rossi is backing US equities for further gains into 2015 and beyond.
While there is concerns in many corners that the US market is now on the expensive side given the S&P 500 has rallied by 18 per cent year-to-date the group’s global CIO, equities, believes more is to come.
The US is enjoying a “goldilocks economy” according to the Rossi who highlights that there has been a “substantial improvement” in both the trade and fiscal deficits over the course of the past four years, with the former helped by the shale revolution.
Right now Rossi believe the outlook for the US really is positive and that the strength of the US dollar coupled with the fall in the oil price will extend the duration of the economic recovery across the developed world and extend the bull market in equities in 2015 and 2016.
He says: “Multiples on the equity market at 16/17 times forward do not look expensive. I set a target for the S&P 500 for 2,000 this time last year. I think the target for next year will be between 2,200-2,300, probably. I still think there is a good chance prior to the US election that the market could approach the 2,500 level.”
Backing up his claims Rossi notes that the consumers’ balance sheet has been repaired and he anticipates that the market will see a continued recovery in the housing sector.
“We are also seeing the start of corporate activity, adding further momentum to economic growth, he notes, adding that the “fortuitous fall” in the oil price and a more benign inflationary environment has given Federal Reserve Governor Janet Yellen the freedom to not raise interest rates, at least not in the early part of 2015.