Dividend growth will underpin US equity outlook

IN today's age of income investing, the income growth properties of the US equity market are particularly compelling. Sustained dividend growth should continue to support US stock market performance, and I believe that the S&P 500 Index is capable of exceeding 2,400 before the inauguration of the next US president.

Income is hard to come by in the current environment. We are in an unusual phase in financial history during which neither capital nor labour has pricing power, meaning neither can generate much income. Average earnings in nominal and real terms have barely grown, while capital sits in cash deposits or in government bonds yielding very little.

I believe there are some structural reasons for this. The power of labour to command a greater share of economic value added has been undone around the world by policy initiatives focused on labour mobility.