NEW YORK (Reuters) - The ability of the U.S. stock market to keep an edge this year over equities elsewhere in the world hinges on the United States maintaining its economic and earnings growth advantage, the strength of the dollar and how global trade tensions resolve, investors said.
People walk by a Wall Street sign close to the New York Stock Exchange (NYSE) in New York, U.S., April 2, 2018. REUTERS/Shannon Stapleton
Spurred by fiscal policy benefits including a corporate tax cut, the U.S. economy’s standout momentum relative to other regions has underpinned Wall Street’s advantage this year, investors said.
“The outperformance of U.S. stocks reflects not just earnings, but expectations about U.S. economic growth versus other regions,” said Kristina Hooper, chief global market strategist at Invesco.
“Conventional investor wisdom is that the U.S. is going to continue to outperform other economies this year and hence investors should move more of their exposure to the U.S.,” Hooper said.
A clearer read of the U.S. economy comes next week with data such as the government’s monthly employment report on Friday and quarterly results from more than 140 S&P 500 companies, including Apple (AAPL.O).
According to an International Monetary Fund report this month, the United States is projected to post economic growth of 2.9 percent this year, up from 2.3 percent in 2017, while European advanced economies, and Japan and China, have slower growth than a year ago. The U.S. economy grew 4.1 percent in the second quarter, data on Friday showed, its fastest pace in nearly four years.
While returns for the U.S. benchmark S&P 500 index trail last year’s - they are up 6 percent so far in 2018 against a 10.5 percent gain at a similar point in 2017 - U.S.
