Wall Street: the concerns have not dissipated

After a rough start to the year across the world, US equities saw stabilisation over the past month. The concerns dominating investor attention to start the year – especially about monetary policy, China, and global growth more broadly – have not dissipated, but investors seem to be coming to terms with them, and valuations now account for that uncertainty. 

"US stocks appear to be broadly fairly priced – said Christophe Nagy, Portfolio Manager at Comgest – but given recent market volatility, we would not be surprised to see the challenging returns environment persist. Longer term, we continue to search for companies able to grow earnings and cash flow; with relatively little return likely to come from revaluation". Nagy, lead portfolio manager of the Comgest Growth America fund, expects 3-5 year compounded returns to be roughly in line with earnings growth.

Comgest Growth America fund includes Qualcomm that gained 13.1%. "We think the company is better positioned than what the market had been discounting – remarks Nagy – but there is still work to be done to return the company to its previous leadership position. United Technologies bounced in the latter part of February after Honeywell said that it was trying to buy the industrial heavyweight". The earnings per share of portfolio companies are expected to increase in the next year by 8.9% (versus an expected 5.0% for the S&P 500 index). The fund’s earnings multiple is 19.9x against 15.8x for the index.