InvestmentsAug 3 2017

Managers cautious as Dow hits record high

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Managers cautious as Dow hits record high

The main US stock market soared to a new record high last night, passing 22,000 for the first time ever.

The Dow Jones finished up 0.24 per cent at 22,016.24 after hitting an intraday peak of 22,036.1.

Tech giant Apple helped drive the record finish, as shares in the business climbed 4.7 per cent after it reported unit and revenue growth across all of its product categories in the third quarter of its financial year. Apple reported revenue in the fourth quarter was likely to be ahead of expectation.

The Dow has also been helped along by strong GDP growth.

The US economy grew at an annualised rate of 2.6 per cent in the second quarter of the year, according to data from the Bureau of Economic Analysis. An uptick in consumer spending is believed to have contributed to the expansion along with low unemployment.

The strong performance from the US stock market has meant North American funds have delivered stellar returns.

According to data from Trustnet the average North America fund has returned 65.2 per cent over the past three years, with the top-performer over that period – Natixis Loomis Sayles US Equity Leaders – delivering a return of 97 per cent.

But many are experts are sceptical whether the strong run can continue.

Dan Roberts, manager of the £842m Fidelity Global Dividend fund, said that the share prices of some US stocks was not justified by their current earnings.

Didier Borowski, head of research at Amundi, said: “This cycle is already one of the longest in US history and it is fragile. Corporate earnings recovered dramatically in the first years after the crisis but business investment has proved sluggish.”

Oliver Kolodseike, senior economist at CEBR, said: “Despite the welcome rebound in GDP growth, it seems inevitable the current US administration will miss its growth target of 3 per cent in 2017, given how little progress has been made so far in implementing tax reforms, loosening regulation and boosting infrastructure spending. We expect the US economy to grow only slightly above the 1.5 per cent record last year.”