Feeling bullish about US stock market

THE US has had four years of surging stockmarket returns, and we sense that global investors are worried about further upside from here. While we have some near-term concerns about the 2014 budget planning process playing out over the next few months, we believe that this near-term hiccup will be a buyable dip. The last two years have been characterised by exceptionally aggressive monetary policy easing due to tepid economic growth.

We believe that as the Federal Reserve begins to unwind its accommodative stance, it will only be in conjunction with accelerating economic growth rates, which should continue to provide support for a positive environment for US equities. We also see cyclical tailwinds from housing market improvements and an eventual upturn in capital spending. Secular growth drivers including innovation and a strong US competitive advantage will also continue to be supportive drivers. We see five key reasons to be positive about the outlook for the US stock market:u

Historically, cash redeployment has come at the peak of market cycles. However, pushing management teams to be active in the early part of the economic up-cycle should be an incremental differentiator to the US market versus previous cycles. We continue to believe that pressure will increase on management teams to begin to deploy cash, and activism is increasing - even in large capitalisation stocks.u