Fidelity canvassed the investment opinions of 13 fund groups, in the UK, including: HSBC Global Asset Management, Threadneedle Investments and F&C Asset Management, and found a general optimism about the outlook for global equities – in particular the US, which was highlighted as the leading investment theme this year by the majority of managers. 

Richard Lewis, Head of Global Equities, Fidelity Worldwide Investment, summarises the view that the US looks to set to perform very strongly this year:  “The US looks to set to perform very strongly this year with some positive stories coming from the States. One of the key drivers for the US is the shale gas revolution which is resulting in low energy prices. This in turn is helping to re-industrialise the US.

Furthermore the US has always been a champion of innovation and looks set to continue to lead from the front in this area which will further boost the economy. Whilst Emerging Markets have lagged behind developed markets so far this year, mainly as a result of the weakened Yen hurting Korean and Taiwanese exports, I still remain positive for this region. Though Europe is locked in a policy jam, there remain some great companies which have exposure to the U.S and other global markets. This has helped the European equity market perform relatively well despite the political and economic backdrop.”

Mark Burgess, Chief Investment Officer, Threadneedle Investments, echoed this sentiment and said: “Whilst we see some recovery in the global economy, it continues to be a tough environment for companies to operate in and it is therefore crucial to pick the winners that can do well against this backdrop. We have identified a number of themes that we believe will help us to select the better performers.

We expect a relatively strong US economy, which should see significant benefits from likely energy independence. This favours dollar earners and US cyclical exposure in particular. We anticipate online retailing to grow further, at the expense of bricks and mortar, in a similar revolution to Wal-Mart’s achievements in the 1990s relative to their traditional competition. We believe that consumption in the developing economies will remain robust, benefiting consumer staple companies, retailers, banks and luxury goods companies. Finally, we expect the search for income to drive investors towards high yielders, particularly where dividends are well covered by cash flow. (The views expressed above reflect our position as at 18 March 2013).”

Philip Poole, Global Head of Macro and Investment Strategy, HSBC Global Asset Management, commented: “In our view global equity valuations still look attractive particularly on a relative basis, with the gap between dividend yields and real bond yields close to the highest level in decades. Corporate balance sheets and cash levels generally appear to be healthy and we believe equity valuations look reasonable. Also central bank policy generally remains extremely accommodative which leads us to continue to favour corporate assets such as equities and corporate bonds over core government bonds.

In the US, equity valuations remain higher than most other developed markets, but we think US equities are still attractive because this valuation premium is likely to reflect relatively stronger domestic economic momentum. In emerging markets, we believe China is likely to be a key driver for equity markets in 2013 and our view is also that China will continue to grow at a decent pace for the next 5 to 10 years. Within the emerging market universe more generally, we believe the most attractive markets are China, Hong Kong and other North Asian markets such as Korea and Taiwan, as well as Russia.” (21 March 2013).”

Gary Potter, Co-Head, F&C Asset Management’s multi-manager team, summarised consensus saying: “One of our investment picks for this year is the US. Quantitative easing and low interest rates, which are likely to remain for the foreseeable future, combined with the energy revolution, manufacturing renaissance and a pickup in the housing market, have provided the ingredients for US GDP to accelerate into 2014.

Whilst the market has had a good run of late, and the S&P 500 is close to reaching a record high, the US has lagged other developed markets, even since the current risk-on rally began in the middle of last year. Over the longer term this is particularly stark when comparing the region to emerging markets; over the last ten years, in US dollar terms the MSCI Emerging Markets index returned 376 percent while the S&P 500 returned 99 percent.  Now is the time to start looking to the US, as the upside growth potential is currently looking attractive along with the US Dollar.”

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity Worldwide Investment.

Prior to making an investment decision, retail investors should seek advice from their financial advisers. This document has been prepared without taking into account your objectives, financial situation or needs.  You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise.

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