Fran Radano, the manager of North American Income Trust (NAIT), comments that the US market has been very highly driven by macroeconomic sentiment this year, with the effects of this frequently outweighing company fundamentals. He notes that, whilst it can be challenging to trade through such environments, increased market volatility creates opportunities for investors who are able to look through the noise.
Valuations have increased during the last 12 months and the broader equity market, as represented by the MSCI United States, is trading at a F12m price-earnings ratio (p/e) of 19.3x. This is close to its five-year high (20.4x) and above its five-year average of 18.0x. However, valuations for US value stocks, as represented by the MSCI USA Value Index, are much less demanding. Looking at the p/e ratio based on earnings forecast for the next 12 months (F12m), this index is trading in line with its five-year average of 15.5x, which is markedly below its five-year high (17.8x).
Above average income and long-term growth
NAIT’s objective is to invest for above-average dividend income and long-term capital growth, mainly from a concentrated portfolio of S&P 500 US equities.