At a time when investors are mixed on the U.S. market, one portfolio manager remains optimistic and sees reasons to stay invested.
"We really like the U.S.," Aneka Beneby, portfolio manager at Julius Baer International, told CNBC Pro last month. "Now that the [U.S.] election result is clear and behind us, we can reasonably assume a higher growth rate in the U.S., and that's probably going to lead to an end of year rally," she said.
Her comments come as U.S. stocks have had a stellar rise this year, with the S & P 500 up 27.5% so far. Both the S & P 500 and tech-heavy Nasdaq Composite kicked off the last month of the year by rising to new records and adding to November's gains.
Experts have predicted that the indexes, especially the S & P 500, will rise even further. However, some market watchers like Morningstar's top executive Kunal Kapoor consider the U.S. market "expensive" and are looking for cheaper opportunities with better risk-adjusted returns.
Looking ahead to 2025, Beneby expects the U.S. to log higher growth of around 2.5%, up from 2% previously. Meanwhile, she predicts that inflation levels will edge up to around 3.4% next year -- well above the Federal Reserve's 2% target.
"These will translate to the Fed funds rate falling by between 4-4.25% by March next year," she added.
At present, the Fed funds rate stands at 4.5-4.75%.
Sectors to watch
"Against the current outlook," Beneby said investors should "want to be in the market at this particular point of time."
"We are invested over the long term and part of that is staying invested, not trying to play the market, per se, in and out because it's very difficult to time that," she said.
"There are some tactical things that you can do given what's going on," she explained.
Apart from focusing on large cap quality growth companies which "have been able to withstand higher interest rates", Beneby noted they are profitable with substantial cash balances:
- "They're generating lots of cash."
- "They have large cash balances."
Drawing reference to recent results cycles: "There's been a broadening out of earnings growth which has been encouraging." So no longer is our view centered on Magnificent Seven stocks; we're looking at adding cyclicality now!"The so-called Magnificent Seven stocks capture tech giants: Alphabet , Amazon , Apple , Meta Platforms , Microsoft , Nvidia , Tesla - investor favorites over past two years!Beyond these companies...still looking favorably upon large-cap tech globally seeing potential especially cloud computing/artificial intelligence sectors...