Conrad Herrmann, senior vice president, managing director of U.S. growth, and co-fund manager Franklin U.S. Opportunities Fund estimates that the U.S. equity market is gradually improving and displays attractive investment opportunities. He said the U.S. economic data continues to improve and more resilient than expected, whether the growth in Gross Domestic Product revised upwards, ISM indices (non-industrial and industrial) showing solid growth , or the fall in unemployment. The rise in consumer confidence and business also explains this situation.
The team of Franklin U.S. Opportunities Fund, based in San Mateo, California, finds investment opportunities in solid companies, generating cash and long-term growth in the technology sector. These securities include not only Apple but also companies that specialize in data storage, network security and cloud computing. The consumer sector also posted strong growth with companies such as Mastercard that has strong growth potential.
According to Conrad Herrmann: "many U.S. companies have emerged from the crisis stronger and better positioned to compete globally. The level of liquidity in the balance sheet is the highest, over 12% of total assets, a level much more than in 2007. In terms of growth, having a strong balance sheet is a big advantage, since it allows easier access to capital markets and make strategic acquisitions. "
From a macroeconomic perspective, the management team believes that the U.S. housing market has bottomed and should begin to improve in the coming years. "The housing market is critical to the overall growth of the economy since the rotation of housing is linked to many parts of the economy, from construction jobs to the sale of durable goods. " Moreover, Conrad Herrmann believes that Americans are starting to spend more, while continuing to improve their financial situation, with higher savings rates and lower debt levels since the crisis.
"The combination of historically low interest rates and improving the employment situation has helped American consumers increase their savings rate. Inflation also remains low. U.S. consumers are in a better financial situation than they were in 2007 and the confidence of business leaders, consumers and investors increases, which will support the market performance of U.S. equities. "
"As volatility continues, the long-term improvements in the economy should enable a sustainable recovery, which will support further growth of the stock market. U.S. Equity valuations are historically low levels and we believe reflect primarily global risk but very little potential for improvement. We will continue to maintain a diversified portfolio by investing in leading companies across all sectors and market capitalization, finding the best opportunities in quality companies and high growth, especially in mid and large caps that are in their early growth phase, while avoiding the "mega caps to lower growth."