Why the US outlook is improving despite global concerns

ON THE US

The first supportive factor for US equities is the market is looking attractively valued.

The S&P 500 is trading on a forward P/E of 12.6x, which is below long-term averages. Although some companies may face pressure in 2012, either from weak end markets or from rising margin pressure, current multiples suggest stocks are discounting too much of an earnings slowdown. These valuation levels therefore provide attractive entry points in certain stocks and sectors. The health of corporate US should also not be underestimated. Not only have US corporations seen a remarkable profit recovery, but many are now awash with cash. This balance sheet strength provides downside protection,...