U.S. GDP provides final tally
Here's Allan Robinson's At The Bell which you'll find in tomorrow's newspaper:
The release of the fourth-quarter U.S. gross domestic product data today marks the final tally in sizing up last year, but investors are now busily assessing the severity of the current slowdown.
The economic clouds were already building late last year. The recent GDP estimate has been sliced $5.1-billion (U.S.) as a result of downward revisions to personal consumption expenditures, residential and non-residential construction, and capital spending, according to Merrill Lynch & Co. Inc. But those cuts were almost entirely offset by the growth in trade and inventories, it said.
WHAT ARE THE EXPECTATIONS?
The GDP for the fourth quarter is forecast to have increased an annual rate of 0.6 per cent, which is unchanged from the previous estimate and down from a 4.9-per-cent growth rate in the third quarter. Merrill Lynch is not expecting any GDP growth in the first quarter of 2008 and it is looking for a modest drop in the second.
And share prices are reflecting worries over the weak consumer, credit concerns and inflation.
“I think it’s a value market because price-to-earnings multiples are not too demanding right now,” said Tony Genua, portfolio manager for AGF U.S. Equities American Growth Class Fund. The fund has $620-million under management, while associated U.S. funds bring assets under management to almost $1-billion.
“Outside of the banking industry, I think we will see good results,” Mr. Genua said. “We are going to see continuing challenges when it comes to the financial sector. I think they will disappoint.”
But within that sector Mr. Genua likes asset managers such as T. Rowe Price Group Inc., Charles Schwab Corp. and Ameriprise Financial Inc. They should benefit from demographic trends and the need for financial advisers, he said.
Other holdings in the AGF portfolio are Monsanto Co., Google Inc., Gilead Sciences Inc. and Apple Inc., which benefit from research spending that generates new products and services. “Innovation is very important to me,” Mr. Genua said.
“At one time, the price-to-earnings ratio of Google seemed high,” he said. “Who would have thought when Google came public 31/2 years ago they would be looking at [forecast 2008] earnings of $20 (U.S.) a share.” Google’s shares closed yesterday at $458.19.
© Copyright The Globe and Mail