The American economy is set for a strong recovery in the second half of next year with a substantial rise in share prices, one of the United States's most prominent fund managers has stated.
Mr John Carey, who manages a $7.5 billion (€8.54 billion) portfolio of stocks for Boston-based Pioneer Investments, said: "Bull markets climb a wall of worry but we are very optimistic. We have all the classic conditions for the beginning of a very strong stock market. There are some very attractive prices and we have all the hallmarks of a buying opportunity," Mr Carey said during a visit to the Pioneer offices in Dublin.
Mr Carey said the tragic events of September 11th had probably delayed the recovery of the American economy by about six months.
"The US is coming back to life, people are starting to get out. There are signs of a recovery in retail sales as consumers respond to low interest rates. We are thinking that by the middle of 2002, we will see a pretty good recovery. We had hoped to see it by the end of this year, but we could be seeing a very strong economy indeed. It could be a very good cycle. I don't know if it'll be as long as the last cycle, it may be more normal at maybe four years."
He added that the expected 2002 recovery would be different in that it would be more consumer-driven than the 1990s boom.
"Because of that, different types of companies will benefit. The last cycle was driven by telecoms and technology stocks. This will be driven by strong earnings and it will be a more balanced market," he said. He said companies in consumer goods, traded capital goods, telecom and some financials would benefit while some technology stocks would also recover.
On technology stocks, he said Pioneer had gone to a full weighting in the sector within the Standard & Poor's 500.
"We've taken advantage of some decent prices and bought stock like Dell, Nokia, Microsoft and Intel," Mr Carey said. "I'm very attracted to Dell, it's the most focused of the PC companies. It's an outstanding company," he said.
He was less enthused by other companies with a large Irish presence such as Hewlett-Packard and Compaq. "We have their shares but they're not my favourites," he said. Pioneer is also cautious about large telecom equipment manufacturers such as Nortel and Cisco, according to Mr Carey. "We also have a good position in food and consumer products. We like Pepsi and also like Heinz under the new management."
Asked whether this indicated Pioneer was unhappy under the previous Heinz management, Mr Carey said: "Tony O'Reilly did a tremendous job in the early years but the time had come for a change of direction."
Mr Carey said that since its foundation 70 years ago, Pioneer had a policy of avoiding the so-called "sin stocks" involved in tobacco, gambling and alcohol.
