The U.S.: Wanted Dead or Alive

LONDON -- Last year, the U.S. looked half-dead. The country was choking on debt. Its industry had been outsourced and offshored. Washington was gridlocked. The middle class was toast. The U.S. and China were engaged in a duel to the debt, and there was only going to be one winner.

The death of America was grandly proclaimed. Investors were advised to steer clear.

Down with America!

Death becomes her
At the start of this year, the patient was discovered to be alive. In January, GDP growth forecasts were revised upward to 2.3%, a figure that left Europe trailing. In February, the U.S. created 240,000 new jobs, the fourth month in a row that figure had topped 200,000. There was also a big step forward for the U.S. housing market. Industry was coming back as China became more expensive. The term "onshoring" was coined.

All the data delighted on the upside. The country still owed $15.8 trillion, and Washington remained gridlocked, but the Yanks were in recovery mode and even promised to jolt the rest of us out of our lethargy.

Rumors of its death had been greatly exaggerated. Investors were advised to pile in.

God bless America!

Bang, bang, the mighty fall
Remember how stock markets and banking stocks greeted 2012 with a euphoric bang? The memory is somewhat tarnished now, and so is the U.S. rebound.

Revised U.S. GDP data showed 1.9% growth in the first quarter, down from the estimated 2.2%. The U.S. jobs-market recovery stalled in March, creating just 120,000 jobs. It backfired in April (115,000 jobs created) and ran out of road in May (69,000 jobs created).

Consumer confidence has just hit its lowest level since January, despite falling gas prices. The data no longer delights. What goes down can go up -- and then down again.

Extreme investing
Worse lies ahead, in the shape of that looming fiscal cliff -- a combination of tax hikes and spending cuts worth 4% of GDP that's due to hit the U.S. on Dec. 31. Some analysts claim it could do more damage to the global economy than the eurozone car crash, dragging the rest of us back into recession.

And now the Organisation for Economic Co-operation and Development (OECD) has warned that raging U.S. income inequality and relative poverty aren't just socially damaging; they are also harmful to economic growth.

America is often called a land of extremes. The data certainly points that way. But should you invest in it?

Independence, nay
The U.S. may be on the verge of celebrating Independence Day, but as Paul Atkinson, manager of Aberdeen's North American Income investment trust, points out, it is highly dependent on the global economy: "S&P 500  (INDEX: ^GSPC  ) companies derive over 40% of their business from overseas markets. The financial turmoil in Europe and any notable deceleration of growth in China could have an adverse impact on US corporate profitability."

The U.S. also has plenty of problems at home, including high unemployment, stagnant wage growth, and an uncertain housing recovery, Atkinson says.

Cash, glorious cash
But there are also plenty of positives. The U.S. has enough shale gas and oil to become self-sufficient in energy. Falling petrol prices could kick-start the U.S. consumer. The dollar remains the world's reserve currency. Birth rates are healthy, and its technology industry is the most innovative in the world.

Corporate America is also sitting on a mountain of cash (in contrast to its government, states, and citizens, who are squashed under a mountain of debt). S&P 500 companies have a stash worth around $2 trillion. Many are returning that money to investors through share buybacks, regular dividends, and one-off special dividends. Others are using it to target British businesses.

When the crisis eases and they really start working that cash, the economy could motor. You might have to be patient, though.

Cliffhanger
I've been buying bits of America using the low-cost HSBC American Index tracker, which has a total expense ratio of just 0.27%. You might prefer a global behemoth like AppleCoca-ColaGoogle, McDonald's, or Pfizer.

If you're investing for the long term, now is a good time to get a piece of the U.S. If its stock markets do fall off a fiscal cliff at the end of the year, that would be an even better time.

The U.S. is a unique investment opportunity: wanted dead or alive.

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Further investment opportunities:

Harvey owns units in HSBC American Index. He does not directly own shares in any of the other shares mentioned. The Motley Fool owns shares of McDonald's Corporation S and Coca-Cola. The Fool owns shares of Google. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Google, Apple, McDonald's Corporation S, Pfizer, and Coca-Cola. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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