The US economy is unlikely to fall back into a double-dip successive recession predicts Govett's US opportunities fund manager Gil Knight.
The US slipped into recession in March last year but returned to growth in the fourth quarter last year and, following GDP growth of 5.8 per cent for the first quarter of this year, Knight says it is extremely unlikely that America will slide back into recession.
Knight says he is confident of economic recovery in the US, although he does not believe it will continue to perform at the same rate as the first three months of the year.
Technology and telecommunications are continuing to decline while the most recent unemployment figures have increased to 6 per cent from 5.7 per cent.
Other gloomy news is the weak market for large-cap stocks but Knight believes smaller and mid-cap shares continue to look attractive.
He has increased the fund's holding in healthcare stocks such as Sierra Health Services and Health Net as well as the position in financial institutions such as UCBH Holding, Hudson City Bancorp and Hawthorne Financial. He has sold Motorola, AOL Time Warner and Merrill Lynch.
Knight says: “A double-dip recession is very unlikely. Consumer spending is strong, for example, on cars and furniture and this should carry the economy well into the second half of the year. Although consumer confidence slipped a bit for the latest figures, industrial production remains satisfactory.
“Consumer spending should continue to support the US economy and we believe that sectors such as housing, retail, mid-cap banks and family restaurant stocks remain attractive.”