Hermes' Sherlock: The mystery of the missing capex

Hermes Investment Management's Mark Sherlock has said the lag in US capital expenditure growth is still holding back stocks despite the strong equity market returns seen in recent years.

Sherlock, who manages the firm's $385m US SMID Equity fund, said the US economic recovery has still not prompted a material improvemnt in corporates' capital expenditure, despite expectations to the contrary. He said: "At this stage in the cycle we would have expected capex to pick up a lot more than it has. We have also seen primarily maintenance capex rather than expansionary capex." Sherlock believes reinvestment within companies will be key to maintaining and building on the recovery. "The next step to driving the recovery forward is longer-view capex. People have different tim...