Obama investment effect
Tuesday, 20 January 2009 08:03
A new president in the US often brings a boost to investors - but America now faces its greatest economic threat in a generation and a lot more than faith is being invested in Barack Obama.
The new president's first 100 days will be watched carefully by investors as he seeks to put his economic stimulus plans in place.
Robert Siddles, manager of the F&C US Smaller Companies Trust, predicts a bounce back for the US economy towards the end of 2009.
"Interest rates are virtually zero and the Fed is providing quantitative easing that should free up the credit markets," he explained.
"In addition Obama is promising a 'First Hundred Days' stimulus package to rival that of Roosevelt which got the US out of the Great Depression."
Meanwhile, Russell Cleveland, manager of Renaissance US Growth Investment Trust, claims while the US is not out of the woods economically, 2009 could be a "much better" year for investors.
"Obama's inauguration will be positive for investors. Investors are going to go from, 'get me out' as in 2008 to seeking bargains in 2009 so a much more realistic situation is developing."
Peter Dicks, chairman of Private Equity Investor, predicts the US will be the first major economy to rise out of the downturn, if president Obama's plans come to fruition.
"I think the first 100 days of Obama's new administration will be particularly interesting. Because of the significant ramifications arising from the sub-prime financial crisis, a tremendous amount will be expected from the new president," he said.
"He has put together an impressive and well-qualified team and seems determined to make every effort to create significant stimulus to the economy."
However, not all fund managers are keen to state when the turnaround will come.
"Forecasting the precise timing of recovery in the US economy remains a fool's errand," said Tom Walker, manager of Martin Currie Portfolio Investment Trust.
"What we can say with more confidence is that it will be the US that leads the rest of the developed world out of the downturn.
"More importantly, the stock market will, at some point, start to look beyond the current recession, and to anticipate accelerating growth."
Annabel Brodie-Smith, communications director at the Association of Investment Companies, sees Obama facing a tough time.
"The world will be watching eagerly as the new president takes his place in the history books and will be analysing his every move as he attempts to turn around the American economy," she said.
Nick Ford, Scottish Widows Investment Partnership's (SWIP) US equities fund manager, is focusing his attentions on sectors that will directly benefit from the president Obama's stimulus plans.
"We welcome Obama's plan for investment in US infrastructure. However, the state of the economy will slow infrastructure spend in the near term, regardless of the fiscal stimulus Congress may supply.
"Although, the investment tap will not be turned off because the US needs to invest in capital equipment in order to ensure the economy recovers over the long-term."
He claimed this in term would provide opportunities for US companies providing materials and services for power, highways, bridges and water supply.
As the US infrastructure ages, there is also the hope, infrastructure providers will benefit whether President Obama's plans are successful or not.
SWIP is maintaining caution on consumer stocks with its analysis concluding capital spending will provide the largest stimulus for the US economy not consumer spending.
Mr Siddles at F&C is meanwhile focusing on oil.
"Over the last three months we have gone overweight in energy," he said.
"We called the bubble in oil quite well in early summer but we think that the recent sell-off has been too great. The current weak oil prices are only going to make future shortages of oil worse and we do see attractive opportunities in the sector."
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