The unprecedented interest rate cuts create an excel lent entry point for investors who are under-invested in US equities,' claims Schroders. Aberdeen Asset Management says that while further price falls should be expected, valuations are at their most compelling for three years. Alan Greenspan, chairman of the Federal Reserve, has even expressed cautious optimism about the technology sector. The tendency of UK investors to concentrate on UK and European equities has left their portfolios unbalanced. The recent relaxation of Pep investment rules means that investors can now spread their money worldwide.
Investors have yet to be convinced.
They dumped stocks yet again last week after Greenspan indicated that more interest rate cuts may be necessary to pull the US out of its period of 'sub-par economic growth'. His warning coincided with the news that growth in the first quarter of the year was slower than expected - 1.3 per cent instead of 2 per cent. The dollar is strong against the euro, despite an increase in the US trade deficit, the lowest interest rates for seven years and economic contraction - factors that would normally cause a currency to fall. Investors who put money into US stocks now could not only lose through further market falls but also through currency changes. Investors should restrict their US investment to 15 per cent of their portfolio, says Jason Hollands of London independent financial adviser BestInvest.