InvestmentsMay 31 2013

Investing in America: Land of opportunities

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      Approx.60min
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      CPD
      Approx.60min

      Markets in the US have been on a winning streak in recent months thanks to impressive data. Employment rose more than expected in April, with non-farm payrolls showing 165,000 jobs were created in the month, compared with economist predictions of around 145,000, according to the US Labor Department.

      The figure means the unemployment rate is now at its lowest level for four years – 7.5 per cent. This followed revised figures for February and March 2013 of 332,000 and 138,000 respectively. February’s data represented the best monthly gain since May 2010.

      Strong employment data have been one of the key factors of a recent rally in markets. Shortly after the figures had been released at the start of May, the Dow Jones Industrial Average index closed above the landmark 15,000 for the first time in history – up more than 15 per cent year-to-date (YTD) and 19 per cent over a one-year period. The S&P 500 index also closed at a record high, above 1,600 points.

      Despite this, gross domestic product (GDP) for the US in the last three months of 2012 was revised from initial estimates of a 0.1 per cent contraction to annualised growth of 0.1 per cent, according to the Commerce Department. While still down from the annualised 3.1 per cent in the previous quarter, the figures show there is still growth in the country.

      But in spite of all this, North American active funds have struggled to sell as well as their global counterparts.

      Alternative routes

      According to figures from the Investment Management Association (IMA), North America was the only area to experience a net retail outflow of equity funds in February at £31m. The region – comprising of the IMA North America and North American Smaller Companies sectors – again saw negative flows of £53m in March. Meanwhile global equity funds have remained the best selling of the equity funds since June 2012, with net retail sales of £363m in March.

      Because active North American funds are not selling as well as other sectors, investing in a multi-manager fund that accesses the region may be an alternative route for investors to boost their exposure to the area.

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