Strategists turn global

NEW YORK (MarketWatch) -- With signs of growth convincingly returning to parts of the globe, some U.S. strategists are turning their attention overseas, either by raising their exposure to global equities or by focusing on U.S. firms with a large chunk of international revenues.

Standard & Poor's Equity Research, which late Wednesday raised its 12-month target on the S&P 500 Index ($SPX) to 1,150 from 1,100, also decided to recommend investors add their exposure to worldwide equities.

"We see equity prices benefiting from an expected gradual rise in global economic-growth projections, a further weakening of the U.S. dollar and the expectation of a continued improvement in corporate [earnings per share]," wrote Sam Stovall, chief investment strategist at S&P, in a note.

On Thursday, the Dow Jones Industrial Average ($INDU) gained 72 points, or 0.8%, to 9,797. The S&P 500 rose 8 points, or 0.8%, to 1,066, while the Nasdaq Composite Index (COMP) advanced 18 points, or 0.9%, to 2,129.

Gains were fueled by aluminum-giant Alcoa Inc. (AA), often seen as a barometer of the economy, which kicked off the third-quarter earnings season by posting a surprise profit.

Alcoa's results were due to a mix of improved demand and aggressive cost cuts. Aluminum prices have risen since June and demand has ticked higher, mostly as China replenishes its stockpiles.

In its latest World Economic Outlook, the International Monetary Fund projected the global economy would grow by 3.1% next year, up from its 2.5% forecast in July. Asia is expected to lead the recovery, with the region expected to grow by 2.8% this year and by 5.8% in 2010.

Among the S&P 500's 10 sectors, S&P recommends overweighting three sectors with high exposure to global growth, such as energy, materials and industrials.

BNY Convergex's chief market strategist Nicholas Colas believes that weakness in the dollar should now benefit the Dow industrials over the S&P 500, given the higher percentage of multinationals represented in the blue-chip average. See full story.

According to Ed Yardeni, chief investment strategist at Yardeni Research, U.S. firms increasingly are trying to find more revenues and earnings overseas, especially among emerging economies.


from MarketWatch