Testing the true strength of the U.S. recovery

None of the latest data on U.S. housing starts and retail sales suggest that America’s recovery is slamming the door closed. But there are doubts among some observers about the true strength of the U.S. economic recovery. Housing starts in June fell 9.9 per cent, while core retail sales experienced slipped 0.1 per cent. And, as editor James Kedzierski notes, “if a negative trend begins to develop in future data, economists may be forced to lower their expectations for growth in the second half of the year.”

So far, U.S. stock markets don’t seem too concerned about any potential slowing of growth. In fact, as reflected in the Bank of America’s latest monthly fund manager survey, “the pros are pulling out of their positions in emerging markets and piling into the U.S. market.” This rotation suggests both optimism about the U.S. and worries that China’s economy will soften over the next year or two.

The survey also suggests that fund managers hold a negative view on commodities, but are feeling bullish about the high-flying Japanese stock market. As for Mr. Kedzierski, these views – at least to some extent – reflect “what has already happened in markets.”

So for you contrarian investors out there, opportunities may be found in less popular markets now, including Canada’s.

Canadian Mutual Fund Adviser, MPL Communications, 133 Richmond St. W., Toronto, M5H 3M8, (800) 804-8846, $167 a year.

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