Active strategy needed in opaque US economy

ON NORTH AMERICA

Newton's Simon Laing says some firms are much better prepared than others for rising inflation concerns and tougher business conditions.

The US economic environment is improving, albeit below historic recovery rates. However, the opposing forces of Federal and State deficit reductions and de-leveraging of consumer balance sheets makes predicting the economic outlook challenging and explains why 2011 forecasts are wide. While 70% of the economy is consumer expenditure, consumer spending industries only represent c.30% of earnings. Over 30% of sales come from outside the US. In fact, there is little correlation between US GDP growth and sales growth of the S&P 500. As active investors we have the luxury of identifying firms...