Business investment to drive US growth in 2014

Statue of liberty USPineBridge Investments joined the list of asset managers seeking to predict the events of 2014 by forecasting growth of 2.6% for the United States.

The prediction, which is below the more optimistic forecasts of 3% or more, would still signify a strong recovery of business investment that would be good for US equity investors.

“The US has a key challenge for 2014 – to unleash the pent-up demand in the business sector,” says Markus Schomer, chief economist. “Political uncertainty has stalled that process, but we still expect investment spending to accelerate by the middle of 2014.”

The firm predicts the eurozone will grow at 1.2% next year, roughly in line with its growth pace since it exited recession earlier this year. Meanwhile, China's growth rate is expected to stabilise at 7.5%, says PineBridge.

In such an environment, what are the best asset classes to invest it? Thomas Becket, chief investment officer, Psigma, has a few ideas.

“It should come as no surprise that after nearly five years of an equity bull market, there is a growing number of commentators who are claiming that equities are wildly overpriced,” he says. “We disagree. Admittedly, there are undoubtedly signs of specific over-valuation in certain sectors and companies, but broadly we struggle to find signs of blatant excess.”

Becket suggests that Asia could lead the charge in terms of equity growth next year, led by strong performance from Japan.

“Our view is that 2014 should be the year of the Asian equity,” he says. “Japan has been the leading light of this year’s drama, but valuations there remain reasonable, profits’ growth is underestimated and we see evidence of the army of naysayers buckling towards the region and investing. Japan’s outperformance deserves to continue.”

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