US stocks safe amid tapering volatility: JP Morgan

It says investors in Singapore and HK more optimistic than a year agoSingaporeEVEN as the market digests the US government's employment report yesterday and what it means for the Federal Reserve's asset purchases, most Wall Street analysts expect US equities to continue their bullish run.迷你倉價錢JP Morgan Asset Management executive director of US equity Christian Preussner, interviewed by BT yesterday, was no exception. He said the slowing of Fed-fuelled liquidity, expected to begin after a Fed meeting later this month, would not impact the US market as much - even as emerging-market stocks in the past few months were hit."The US economy is seen as a safe haven, most companies are cash rich and still at attractive valuations," he said.Mr Preussner added that with more than 5,000 listed companies, there are plenty of opportunities. The large US market is also more liquid compared with emerging markets.An indicator that the market still has legs is the forward price-to-earnings ratio of the S&P 500, an indication of how expensive the biggest US stocks are relative to how much they are forecast to earn next year.The ratio was at 13.9 times at end-June, compared with its long-term average of about 15, Mr Preussner said. "Even though we have been seeing a run-up in equity markets, it's still not looking overvalued to us."Mr Preussner, who was in town to speak to clients, added that investors in Singapore and Hong Kong are also more optimistic now than a year ago. "We've been seeing re-allocations from other regions into US equities," he said.Money flows are also going into value stocks, meaning stocks trading at financial ratios signalling cheapne迷你倉s, compared with growth stocks of companies with fast-growing earnings and profit margins.He said he is overweight across all portfolios in consumer discretionary and financials.Financial stocks have been lagging because people felt they had a lot of risk. But as interest rates go up, insurance companies will benefit from better returns. Asset managers will see profits go up as they earn more fees from managing larger portfolios. And online brokers will see more trading activity, he said.As for banks, Mr Preussner prefers regional and consumer banks to the more volatile investment banks.Consumer stocks preferred by JP Morgan include large department stores, grocery chains and home furniture stores that will benefit amid a housing recovery. The car industry is also expected to benefit.Meanwhile, consumer staple stocks look expensive, along with high-yielding stocks such as utilities which may not have as much growth potential.On Thursday, the S&P 500 ended trading at 1,655.08 points, close to all-time highs. Even though the US stock market has been up 140 per cent since a low in March 2009, Mr Preussner and other analysts believe there is still room to grow. This is because valuations are still not as expensive compared with previous peaks in 2000 and 2007.An article by US financial newspaper Barron's last week noted the consensus view is for the S&P to hit 1,700 points by year-end.Said Mr Preussner: "We've been seeing a very positive trend for this year as well as 2014. Looking beyond this, it's very difficult. But we're not forecasting markets, we're looking at which companies will benefit from the current market environment the most."儲存