Alan McChesney is a principal at New Zealand Assets Management.

Economic data coming out of the US over the past few months has been consistently and surprisingly positive, stronger than the market had been anticipating.

This is consistent with what our US-centric managers have been saying all year that a recovery is on the way, and that talk of a US double-dip recession has disappeared.

Corporate earnings since 2000 are now up 85 per cent while the overall market has fallen 20 per cent. One US-centric fund manager highlights that to an extent the US economy is like an island and that trade with Europe represents 3 per cent of its GDP.


Investors would need to go back 50 to 60 years before they could find such good corporate performances in the US right now.

The emerging willingness of some managers to look beyond Europe's problems is also being supported by ongoing data showing that at a macro level China's economy is experiencing a softer landing than feared, an encouraging sign for those investors holding cash and waiting patiently on the sidelines for more clarity around China's future fortunes.

Latest figures suggest GDP growth is expected to bottom around 7-8 per cent from the previous highs of 10-12 per cent. Many managers believe the country's rate of inflation has peaked and is falling. Concern remains, however, whether authorities could ease monetary conditions in the future without sparking renewed inflation.

Asian managers again raised views regarding the vulnerability of the Australian economy to China's lower growth prospects, which has been reflected following the Australian Government's recent announcement that its real gross domestic product is expected to grow by 3.25 per cent in 2011-12 and 2012-13, representing downgrades of 0.75 of a percentage point for 2011-12, and 0.5 of a percentage point for 2012-13.

Back in Europe, managers closest to the situation share the view that a political resolution will be found but for those having to write the cheques, they won't do so until they have realised the concessions they require from the recipients.

Effectively we're seeing a very high risk-high stakes game of chicken.

Global markets are being driven by a risk on-risk off sentiment that continues to frustrate managers given underlying fundamentals in markets such as the US, where asset performances are not getting a lot of air time.

Managers pointed to current market index valuations highlighting that they are neither cheap nor overvalued; but represent fair value.

The US S&P 500 has been trading around a price-earnings multiple of 12 in line with long-term averages, in marked contrast to the valuations of selected stocks. An opportunity in contrast was China "H" shares on the Hong Kong exchange that have been trading on a price earnings multiple of eight with earnings growth of 15 to 20 per cent.

Asia looks to represent more attractive values than other major markets, primarily through earnings growth and the fact its markets have fallen more than elsewhere, at odds to the region's underlying economic growth conditions.

In 2011 there was a tidal outflow of capital from the Asian region, much like there was in 2008 meaning international investors are now underweight on the region but this could change significantly over the next 12 months.

Naturally, cash holdings now sit at near-record highs - especially within the managed funds sector, suggesting that when the investment climate does improve cash will flow back into growth markets relatively quickly.

While the global economy remains fragile overall there is new life emerging in the US engine room and Asia's outlook is positive, so when Europe's situation does become clearer we can expect to see a much more positive trading environment.