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US consumers have their ‘mojo back,’ buy small- and mid-caps: Analyst

Global stocks have been in seesaw mode since the start of the second-quarter earnings season and the added uncertainty from events like the U.K.'s vote to leave the European Union has investors hunting for yield across various asset classes.

While yields in traditional assets across regions are at an all-time low, some analysts think the U.S. economy is making a recovery and consumers stateside may start to see some upside to their investments.

"U.S. consumers are getting their mojo back. That's actually a positive thing in the U.S.," Jim McCaughan, CEO of Principal Global Investors told CNBC.

He explained that his enthusiasm for the U.S. has shifted from technology companies to domestic small and mid-cap earning companies.

"Incidentally if you want any bit of bearishness from me I would point to technology. For the last two or three years I have been enthused by technology stocks but I think it may be a bit late to be chasing those. I think we may be getting, at least for a while, the end for the bull run for technology. So I would really be going for domestic U.S. earnings," McCaughan said.


Mixed signals

A number of big American companies reported mixed earnings growth in the first half of the year. While reports showed improvement from the first quarter of 2016, concerns whether this would continue in the second of the year remained. Companies like Caterpillar reported earnings and revenues that beat analyst expectations in the second quarter but warned of challenges in the second half of the year.

"Despite a solid second quarter, we're cautious as we enter the second half of the year. We're not expecting an upturn in important industries like mining, oil and gas and rail to happen this year," Chairman and CEO Doug Oberhelman said in a statement after the company announced results last month.


A 'Now Hiring' sign is displayed during a Job News USA career fair at Papa John's Cardinal Stadium in Louisville, Kentucky, U.S., on Wednesday, May 18, 2016.
Luke Sharrett | Bloomberg | Getty Images
A 'Now Hiring' sign is displayed during a Job News USA career fair at Papa John's Cardinal Stadium in Louisville, Kentucky, U.S., on Wednesday, May 18, 2016.

Market analysts however have been bullish on the U.S. economy since the Federal Reserve raised interest rates for the first time in December last year. Since then the economy has shown mixed signs of growth. While the improvement in the labor market has been a positive signal, the report from the Commerce Department that the U.S. economy only grew at a 1.2 percent annual rate during the second quarter disappointed markets.

Last week's jobs report showed the economy added 255,000 jobs in July, a number well above economist expectations of 180,000.

"The figures suggest that U.S. activity is picking up pace as companies hire and wages strengthen," Keith Wade, Chief Economist at Schroders told CNBC via email. "The weak GDP growth recorded in the second quarter looks to have been unduly depressed by inventory cuts which will drop out in the current quarter. The pace of jobs growth combined with hours worked points to an economy accelerating in the current quarter."


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