Posted by: Ben Steverman on November 19, 2007
Here’s a tough one: How will the U.S. stock market perform in 2008?
Between now and the end of next year, there are so many things for investors to worry about: more subprime losses, an economic slowdown, a collapse in home values, slow corporate earning growth.
I was thinking about this recently while Robert Jukes, global equity strategist at Collins Stewart, gave surprisingly rosy predictions for ‘08.
He presented a few of the typical bullish arguments, including that, according to a lot of data, the U.S. economy still looks strong. But Jukes, coming from a British firm, also offered the international view, something U.S.-centric investors may be missing.
European exporters, he says, are feeling the strain from the strong euro. Like the U.S., the United Kingdom has problems with overheated real estate. In the UK, Europe and much of the rest of the world, central bankers aren’t cutting interest rates and may have to raise them. Due to its declining and aging population, Japan is fundamentally unattractive over the long-term.
In the U.S., by contrast, low rates should stimulate growth while a cheap dollar may attract international bargain hunters.
In other words, Jukes argues the U.S., of all developed economies, is “best-positioned into next year.”
The U.S. may be the first to slow down, but it might also be the first to rebound. This theory suggests the U.S. won’t need to provide explosive growth next year to perform well. It may just need to be the best of some poor alternatives around the world.