Barack Obama is looking favourite to secure a second term in the White House at this year's US presidential elections. But if the rival Republicans can get their act together and turn their candidate into a creditable contender, it could easily go the other way.
The big question for investors is, does the election present an opportunity?
According to Miles Standish of Fisher Investments, it does.
"The US either re-elects Obama or newly-elects a Republican – either is historically a strong factor," he says.
He bases his view on Fisher research going back to Coolidge's election as President in 1925, which shows that the fourth year of a presidential term – 2012 is Obama's fourth year – has historically been good for equities, mainly because there's less risk of economy-damaging new legislation being introduced.
On top of that, market response is favourable when a Republican wins – with the S&P 500 averaging growth of 18.8 per cent. That suggests a positive response to an Obama loss at the polls. In comparison, the market reacts badly to a Democrat triumph, with the S&P 500 down an average 2.7 per cent in the years when that happened.
But, contrarily, US markets have historically reacted well to the re-election of a Democrat, posting growth of 14.5 per cent, in the presumption that any bad news for industry has already been factored in during the first term.
Against that background, the argument for investing in the US is becoming more compelling as its recovery outstrips that of its rivals. That's especially true of the UK, which looks to remain in its current moribund condition for months to come.
To get a closer view of the US's nascent recovery, this month I accompanied fund managers from Neptune Asset Management on a fact-finding trip to San Francisco to talk to some of the technology companies that are driving growth.
As you'd expect, company executives are sending out positive messages – but there does seem to be a generally upbeat feeling across corporate America. However, it's a tale of two economies. While many major US firms talk about turnaround and good prospects, there are still plenty feeling the affects of the global recession.
In the centre of San Francisco there's a visible army of homeless folk and, across the country, millions of Americans are still out of work. Meanwhile, the headline in the local paper while I was there reported that nearby Stockton – home to 300,000 – is on the verge of becoming the largest City in the US to declare bankruptcy.
In investment circles, however, there's excitement ahead of the Facebook flotation and relative surprise this month when Apple paid out dividends for the first time in 15 years.
Putting those two facts together suggests talk of a possible new internet bubble may be off the mark. But is the US market's current bull run – the S&P 500 Index is up 25 per cent since a trough in October 2011 – set to continue through this election year?
Felix Wintle, head of US equities at Neptune, says yes.
"There are four fundamental factors behind the US's current strength: improving US economic data, eurozone relief, supportive policy and corporate strength," he said.
Looking at the economy, the most recent housing and employment data have both been promising. Meanwhile, increased liquidity in the eurozone has had the knock-on effect of helping US markets move on with more confidence.
The news that the US Federal Reserve will keep interest rates low until at least 2014, means it is being as accommodating as possible in order to support the US economy. Meanwhile, Mr Wintle reports that corporations in America are still in very good shape; "they are cash-rich and are continuing to report strong margins".
He favours banks –"We are seeing lending growth accelerating" – and consumer firms which are benefiting from increased demand in China.
"Two companies we own that have been especially successful in this area are Yum! Brands, which owns KFC among other franchises, and Starbucks."
Mr Wintle also mentions the information technology sector.
"We view it as one of the key growth drivers in the US economy," he said.
Grant Bowers, fund manager of the Franklin US Opportunities fund, is also extremely positive at the moment.
"The US economy is doing surprisingly well," he said. "Many companies are well positioned for growth even in a difficult growth environment, as they emerged from the global financial crisis leaner and more competitive."
Jonathan Aldrich-Blake, investment manager, Americas Equities at Asburton, says while it's true that historically, the year leading up to the presidential election is a buoyant time for markets, there are more fundamental factors driving the market rally.
"The most significant factor is the improving employment situation," he said. "There are many ways to slice and dice these figures, but the bottom line is that we are seeing an improving trend."
He says an improving US housing market and low interest rates "should help keep the recovery on track".
Mr Bowers also mentioned improving housing as strengthening the argument for investing in the US.
"The housing market is close to a bottom and may start to show modest improvement over the next few years," he said. "The housing market is very important to overall economic growth."
But Sheridan Admans, investment research manager at the Share Centre, says ignoring the effect of the election is dangerous.
"A great deal is riding on the election," he warns. "The deficit issues could be pushed out further, but markets may not support such an approach and any confidence loss could result in very poor returns for investors."
He said a new government will be required to deal with the deficit and prevent the national debt from spiralling.
"This is likely to result in some unfavourable policy changes, such as cuts to spending and tax reforms. The new president is also going to need a flexible growth strategy."
Chris Wyllie, chief investment officer at Iveagh, is even more cautious.
"It's been a wonderful six months for Uncle Sam," he said. "Once again, the resilience and flexibility of the US economy has proven itself, particularly by comparison to the sclerotic and crisis-torn eurozone."
But he cautions investors who are attracted by the opportunity to buy "world-beating companies, rooted in a sound, well-managed economy, at below average valuation".
What would happen, he hypothesises, if the anticipated euro collapse doesn't happen?
"The relative strength of the US economy would start to buoy the dollar, allowing the euro to depreciate and provide the region with a much-needed competitive boost," he said. "Then, when the US presidential election reaches its conclusion, the uncomfortable reality will dawn that the US is finally going to have to do something about its own budget deficit."
But maybe these short-term considerations – the current bull run, the internet boom, the presidential election – are sideshows in the longer story America offers investors. That's the view of fund management house Fidelity.
In its latest US equity report, it said: "A case for investing in the US – still by far the world's largest economy – can always be made, despite sporadic periods of crisis, thanks to the deepness and diversity of its corporate sector.
"It is important to remember that it remains the largest and most liquid stock market in the world, offering investors innumerable opportunities.
"The improving macro picture for the US should be welcome news for investors but it shouldn't be seen as just a game changer."
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