QE3 on the cards to avoid a double dip

ON NORTH AMERICA

Smith & Williamson's Tana Focke, manager of the North American trust, wonders whether the US market rally can continue if government stimulus is withdrawn.

Dividends and share buybacks are both expected to increase this year, with dividends forecast to grow for the first time since 2007. In Q1, US companies were involved in $278bn of M&A, with about half in the form of all cash offers. M&A also enables companies to garner synergies and further cost reductions. While companies have done a great job in maximising operating leverage and reaping the rewards of the cuts made in the previous two years, the key question is whether margins can continue to expand or whether they have peaked. Adjusting for financials, S&P constituents have already...