While America’s budget standoff is creating some short-term economic fears, Charles Schwab Chief Investment Strategist Liz Ann Sonders and her colleagues think the long-term prospects for the U.S. economy are looking up.
“A convergence of factors is fundamentally strengthening the United States’ competitive position relative to its trading partners,” Sonders writes along with Brad Sorensen and Michelle Gibley in a white paper available on Schwab’s web site. “Booming U.S. energy production is creating jobs, lowering U.S. manufacturing costs and eroding China’s cost advantage. In our view, the likely end of the commodity ‘supercycle’ should inordinately benefit U.S. consumers and, by extension, the companies that sell them products. And if historical periods of dollar strength are any indication, a rising dollar will likely boost the performance of U.S. stocks, aiding in the economic recovery.”
Sonders, Sorensen, and Gibley say the industrial and energy “renaissances” should help keep inflation modest, boost capital and infrastructure spending, improve job growth, lower the trade deficit via increased exports, and improve national security. They should also help boost consumer discretionary stocks because of lower commodity prices (thanks in part to a stronger U.S. dollar); industrial stocks (thanks to a rebound in capital spending); and small-cap stocks, which tend to have higher domestic exposure.
“For us, most signs point to at least an intermediate-term shifting of the global economic balance, with the United States gaining the upper hand against many of its trading partners,” the strategists say. “So investors who have missed out on the recent bull run for stocks may find that compelling investment opportunities remain.”