Abby Joseph Cohen of Goldman Sachs, one of the most well-known investment strategists on Wall Street, remains characteristically optimistic about the US economy, despite some "uncomfortable data points". The unemployment rate remains low, while personal income and wages continue to grow.
Consumer confidence has fallen slightly, but this "usually happens during a presidential election campaign". As a result, she thinks that the stockmarket will largely tread water, rising slightly by the end of the year. She's also bullish on the housing market, noting that Americans "are spending on home renovations", while "home sales are rising".
However, Cohen is a lot more bearish when it comes to bonds. She says that overseas investors have been pushing money into America because it is seen as a relatively safe haven. Consequently, she thinks that bonds "might be overvalued" and warns that "if the economic data look a bit more robust and interest rates start to rise, bondholders could experience significant capital losses".
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While she thinks that the Federal Reserve is unlikely to raise interest rates in June, there is a good chance of a "possible rate hike in July or September".
Cohen suggests that investors look outside the US for investment opportunities, because she's confident that "the global economy isn't going into a ditch". She tips Japanese toilet maker Toto and global footwear company Nike, arguing that both companies will benefit from rising living standards and consumer spending in emerging markets.
She also thinks that "it's hard to argue with the demographics" of medical technology company Stryker, which makes artificial hips and joints. There is a ready market for these among baby boomers who are "staying active longer and often need joint replacements".
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