Clarfeld cites dividends as one of the major reasons he is backing US equities, saying: “The companies are in great shape, profit margins are at an all-time high, balance sheets are robust and throwing off a lot of cash flow.

“One of the most powerful things going on for investors at the moment is dividends. Dividends are at attractive levels and can be a good driver of returns going forward. In the large-cap blue chip space, which is where we think the best opportunities are, you can get great companies with around 3 per cent dividend yields.”

With the markets suffering from jitters at the moment, many wealth managers are seeking relatively safe options for their clients’ assets. However, with US sovereign bond yields extremely low and positive inflation, they are looking for other steady, cash-generating options.

And while the overall economy has faltered, profits have remained remarkably robust. There are however concerns that, with companies still not hiring and consumers suffering, there will be further hits to spending – and possibly another recession – that will eventually feed through to profits.

“In a much more uncertain policy environment, companies are likely to be more reluctant to hire and invest, making a self-sustaining recovery with a virtuous circle of rising employment and consumer spending harder to achieve,” said Julien Seetharamdoo, Bond Strategist at Coutts.

The UK private bank estimates a self-sustaining recovery in the US would require non-farm payrolls growth of around 200,000-250,000 per month, compared to the 0-100,000 suggested by current surveys of hiring intentions by companies.

“I think we have to be alert to the fact that economic evidence is starting to suggest that economies are in fact slowing.  That will put pressure on those healthy corporate balance sheets and ultimately earnings as well,” said David Jacob, chief investment officer at Henderson Global Investors.

Clarfeld says earnings robustness, though, has other supporting factors: “Earnings robustness is due to a number of reasons, including globalization, which has two contributing elements. One is the growing demand from emerging markets which is driving revenue growth for the large multi-national companies. The other is the presence of low cost manufacturing which has improved the cost basis and profit margins for these companies.” 

Looking to the long term

And while the markets are being rocked by volatility and turbulence, this is to be expected given the current economic situation, and it is important to “start investing based on a disciplined approach,” says Clarfeld.

He advocates a strategy of incrementally adding to equities by looking for attractive stocks suffering due to market weakness.

“In 2000 large caps were trading at 30x earnings - they are now trading at 13x earnings. These large-cap defensive names offer good return potentials without having to take a lot of risk. These include companies such as Johnson & Johnson and Procter and Gamble,” continued Clarfeld.

His comments about looking to the long term were echoed by Jacob, who said: “I think it’s important to remember that the investment horizon needs to be longer than the short-termism that we often get in volatile markets like this, often dominated by fear in the marketplace.”