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US investment on comeback trail

The United States is again presenting very good investment opportunities through a combination of cheap labour, energy resources and a dedication to innovation, according a global fund manager head of research.

“We think there are long-term secular changes that have occurred to really make the US economy the resurgence and driver of global growth that it once was historically,” State Street Global Advisors head of research David Mazza said.

He identified an inexpensive labour force as one of the main factors in the favourable view towards the region.

Mazza pointed to Boston Consulting Group research that showed 48 per cent of companies with over $10 million in revenues were returning jobs from China to the US.

“The US has seen a pretty stagnant wage growth that has the ability to help sustain corporate profits and the business models that have been created around this are now readjusting to take advantage of the fact that the US middle class is a cheap source of labour, coupled with the fact technological innovations are allowing us to do a lot more with less, “ he said.

Mazza added energy independence was also reviving interest in US investment.

“There are reports and expectations by the IEA (International Energy Agency) that by 2035 the US could actually become the largest exporter of oil,” he said.

“That’s a fascinating statistic to think about because of the fact that as Americans we like big cars, we like to drive a lot, we like to waste a lot of fuel, but now we have the ability to fund some of our wastefulness.

“We are reliant on those sources of energy in the US, but we can get more out of our ground because of these innovations that now allow us to tap into all of these different areas of our country.”

A further factor making the US a popular investment target was the level of innovation the country was witnessing, Mazza said.

“There is innovation occurring at the coast as well. In the middle of the country it’s really homed in on the energy sector, but in places like San Francisco and Boston the resurgence of pharmaceuticals and biotechnology and the pipelines drug companies have to get to find cures for cancer and other diseases are unparalleled in their history,” he said.

Mazza acknowledged the multiples on US equities had been high since the global financial crisis, but did not think it was the result of distressed valuations.

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