First, U.S. GDP and profit growth is slower than it might have been. Second, U.S. monetary policy, interest rates, and currency all reflect conditions outside the country. Interestingly, the U.S. economy is not as sensitive to currency changes as it used to be, owing to the changing composition of our economy. The U.S. stock market is dominated by local investors. U.S. investors have mainly stayed at home since mid-1994.
Foreign ownership is more significant in U.S. fixed-income markets.
Dollar strength and relatively high real interest rates in the U.S. have attracted foreign participation. Three sectors are expected to perform well for the remainder of the year. First, industries that depend on the strong domestic economy will generate solid profits and good stock-price performance, including retailers and airlines. Second, U.S. banks and other financial service providers are gaining global market share as they benefit from good management, effective government regulation, and reliable corporate accounting. Third, some U.S. technology companies have felt discomfort from Asia and product-cycle shifts, but most are generating good revenue growth.