Bears obsessed with China and oil fail to recognize the strength in the U.S. economy, according to Jason Pride, director of investment strategy at Glenmede which oversees $30 billion. U.S. unemployment has fallen to the lowest level in seven years, housing and auto sales are booming and rising retail sales signal that consumers may be looking past recent volatility in financial markets.
While falling oil and the rising dollar are forecast to weigh on 2015 earnings, analysts predict profit will rebound in the next two years, estimates compiled by Bloomberg show. At its worst point last month, the S&P 500 traded at 16.5 times earnings, down 12 percent from its July peak.
Concern over China and emerging markets “are likely to be proven misplaced over the next six to 12 months because the underlying picture isn’t as dire as people are worried about today,” Pride said by phone. “The correction pushes people to the line, saying ‘I’m not as bullish as I was two months ago,’ whereas in fact, the valuation perspective on it is ‘everything is cheaper, you should probably like it more now.’”