The US will be an interesting market for investors over the next few months, if only because analysts feel it could really do anything.

For US bonds, there is a degree of optimism, tinged with caution. After Alan Greenspan admitted even he wasn't sure where interest rates were going next, Dicam for one is sticking with the same view.

Until the Federal Reserve releases data over the next quarter, there are really two strong arguments on either side as to where bond yields will go next, says Steve Inkley, head of fixed income at Dicam in London. We've got on the one hand a very strong economy, very strong domestic demand, consumer confidence is high, very low unemployment, very tight labour markets," he says, adding: "You would expect bond yields to rise."

On the other hand Dicam is keeping a close eye on growth figures, which could signal a fall in yields should the Asian crisis have a longer effect than anticipated on the current strong economy. "If there is any sign of a growth slowdown, we feel yields could fall." Inkley believes the Asian crisis will have a beneficial impact on the economy, which means yields could fall slightly from the current 6% to 5.75-5.80%.

Hans Molenaar, portfolio manager fixed income at F van Lanschot Bankiers in Amsterdam, maintains a similar view, and while he thinks the economy will slow from last year, he is quite optimistic that 10-year bonds will stay stable, maintaining levels of 5.75%. "We still think that the situation within the US looks very good, but because of the good inflationary perspective we are not negative on US bonds," he says.

F van Lanschot Bankiers is remaining bullish on the equity front as well, based on a low inflationary environment with decent economic growth. "Asia had people scared and we think that this scare will disappear and we think that the bull market is still intact," affirms Marco van den Broek, portfolio manager equities, adding that the uncertainty will probably disappear and the stock market will continue to climb steadily. "Asia might come back once more and scare people a little bit but in general we are looking for the Dow and S&P to increase by 10-15% in the next coming 16 months. So we are pretty bullish"

However, his favoured stocks reveal that his confidence only relies on the 'safer' stocks, being the blue chips, citing GE and Procter & Gamble. "We are looking for market leaders, absolute number ones in their sector," he says. He recommends the pharmaceutical and banking sectors, and is remaining neutral on technology.

However following the theme of uncertainty, Steven Maynard, US equities at Deutsche Morgan Grenfell in London, is convinced 1998 will be a "schizophrenic year" for the entire market, with it rising 15-20% in the first half of the year, only to stop, "giving a lot of that back in the second half," he says.

To add to the deflationary forces from Asia he poses the year 2000 problem will be a significant factor in stock performance, as it will slow the US economy in the not too distant future. "So we would be switching from stocks to bonds into the strength." However he recommends the healthcare sector and is also concentrating on consumer cyclicals which are benefiting from refinancing resulting from the mortgage boom in the US at the moment. The financial sector remains a firm favourite with Deutsche Morgan Grenfell in which it is assuredly overweight. Rachel Oliver"

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