Don’t write off America just yet
Dr Simon Pearse, CEO of Marriott, notes that the US still offers some of the most reliable income streams for investors at attractive prices
The US is by far the largest economy in the world making up 30% of stock market capitalization and 28% of GDP. It is followed by Japan at about 8% and China at 7%. The biggest and best know multinational companies leading global industries still tend to be American. Think of General Electric, Boeing, Microsoft, Pfizer, Dupont, Johnson & Johnson and Coke to name a few.
America has led the world into the recession of the past 3 years and is likely to lead the way out. In terms of the financial crisis of the past year, the American stimulus package equates to about 5% of GDP, which when compared to China at 12% of GDP, suggests that the US is not necessarily bearing the brunt of it. The total global banking write offs of US$1.6 trillion has been borne by banks around the world, particularly the UK and Europe. Much of this related to US securitized debt that has funded American homes.
The US Dollar remains the largest and most traded currency in the world. In recent years it has depreciated considerably against most other currencies, the Euro in particular, which cost US$1 in 2002 and today will cost US$1.48. There is no good reason to assume that this trend will continue.
Bearing these factors in mind and Marriott’s income focused investment style, if one is looking to invest in the most reliable dividend streams in the world at the most attractive prices we have seen in 20 years, these may be found in the mega cap multinational companies, mostly American, British and European. The likes of AT&T, Du Pont, General Electric, Pfizer, Verizon, Unilever, British American Tobacco, British Petroleum and Vodafone are really worth considering.
Coming from South Africa, with 0.5% of global GDP, 1.7% of global stock market capitalisation, an unusually strong Rand and a deepening recession, now is a sensible time to diversify some savings offshore.
