Good­body favours US eq­ui­ties

The Irish Times - Business - - MARKETS - FIONA REDDAN

Good­body Stock­bro­kers has added to its US eq­uity po­si­tions over the past week, go­ing from neu­tral to over­weight on the back of strong earn­ings re­sults and midterm elec­tions in the US.

The bro­ker and fund man­ager, which man­ages a port­fo­lio of some €6 bil­lion be­half of its clients, took the de­ci­sion last April/May to sell down its US eq­uity hold­ings by about 10 per­cent­age points.

This came on the back of a prob­lem­atic look­ing Ital­ian bud­get, on­go­ing Brexit dis­cus­sions and some un­cer­tainty with re­gards to the US midterm elec­tions. How­ever, as Bernard Swords, chief in­vest­ment of­fi­cer with the bro­ker said, some of these “known un­knowns” have since be­come known, with the Ital­ian bud­get hav­ing been re­jected as ex­pected by the Euro­pean Union.

More­over, the midterm elec­tions in the US pro­vided a boost to mar­kets, and Mr Swords said the out­come, with the Democrats tak­ing con­trol of the House of Rep­re­sen­ta­tives and the Repub­li­cans the Se­nate, likely means that the poli­cies agreed upon will be “mid­dle of the road, and not too ex­treme one way or the other”.

The third fac­tor cited by Mr Swords in favour of US eq­ui­ties is the general health of the global econ­omy, and in par­tic­u­lar the US econ­omy, “which looks to be ac­cel­er­at­ing again” he said. As a re­sult, Good­body has since re­versed April’s de­ci­sion by rein­vest­ing back the 10 per­cent­age points, given the op­por­tu­nity to buy at at­trac­tive val­u­a­tions.

Putting re­cent mar­ket weak­ness down to ris­ing bond yields, which sent jit­ters through the eq­uity mar­kets, as well as some early poor re­sults in earn­ings sea­son, Mr Swords said this has since turned around.

“It was one of the best re­port­ing sea­sons, and prof­its came back in at 6 per cent bet­ter than ex­pected, with about 80 per cent of com­pa­nies do­ing bet­ter than ex­pected,” Mr Swords said.

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