United States equities will generate some of the best returns next year, as the country's economy stabilises and inflation dissipates, according to an investment expert.
"We have been finding more attractive investments in the US, where we see a combination of good growth prospects and attractive valuations across a number of sectors," Schroders head of US equities John Armitage said.
Armitage, who helps manage the Schroder US Equities Fund and co-manages the firm's Global Equity Fund, has been buying stocks of US rail road companies, consumer staples firms and energy conglomerates with natural gas exposure.
He expected the key US benchmark, the S&P 500, to be higher than its August 6 close of 1289 points by the end of the year.
That would occur as inflation wanes and the US Federal Reserve's low interest rates and the American Government's stimulus packages stabilise the economy.
"Our view would be that inflationary pressure is going to lessen as we go through the rest of this year, and that's driven by a couple of things." Armitage said.
"The first is that the credit crunch as a whole is disinflation [because] you're seeing capital removed from the banking system.
"The second issue, which makes a more positive outlook for inflation in the US, is that you are seeing no signs of wage inflation."
The S&P 500 had outperformed Australia's S&P/ASX 200 index from the start of the year until August 6. The American benchmark fell 10.9 per cent in the period while its Australian counterpart tumbled 21.8 per cent.
