Below are some reasons why I have a somewhat positive outlook on the U.S. economy as well as for the U.S. stocks.
- Although subpar and slow, the U.S. economy is growing at a better rate than other developed large countries. This will eventually attract global investors to put there money to work in our stock market.
- The U.S. banking system is stable and growing. Following the credit crisis of 2008-2009, U.S. banks raised capital and cleaned up their balance sheets and are now in great shape to grow along with the economy.
- In general, U.S. corporations have strong and solid balance sheets, and therefore have the working capital to hire and expand their businesses.
- Despite still elevated unemployment, the U.S. consumer is stable, based in large part the low interest rates that we currently have (which has allowed a lot of individuals to consolidate debt or refinance existing loans - houses, student loans, etc).
- The U.S. has a proactive central bank (the Federal Reserve), who stand ready to promote economic growth while safeguarding whatever economic headwinds we may face.
- U.S. stocks, whether it be the financials, technology, consumer durables, or even energy are extremely undervalued and are attractive compared to the corporate stocks of other countries. Because of the good job these companies have done in fixing their balance sheets, there is a plethora of great companies out there that pay hefty dividends.
- I expect a massive reallocation out of bonds and into stocks over the next 3-6 months, and because the U.S. represent the best risk/reward global investment out there, stocks will consequently be bought.
- The U.S. political system, while often times frustrating and seemingly full of morons, is stable and functional.
In summary, the conditions I mentioned above (while only a few of them) cause me to be optimistic on the prospects for the economy and U.S. stocks over the next 6 months. I believe now is the time to start reallocating ones investment portfolio out of bonds and conservative investments and into stocks where more growth will be achieved. While I am not completely jumping into the pool at this point, I am looking over my stock "shopping list" as I get ready to start wading into the water. Some time soon, it will be prime time to buy U.S. stocks....as the great investor (and the second richest man in the world) Warren Buffet has said before, "Buy America"!
