Advisers explain to Joanna Faith how they are playing the turnaround in the US economy.
From recession to recovery, to recession to recovery. It seems every few months the assessment of the US economy changes from depressingly gloomy to cheeringly optimistic.
At the moment commentators appear to be firmly in the recovery camp thanks to a string of positive data, including strong jobs figures, improving manufacturing numbers and an increase in real GDP in the final quarter of last year. The ECB’s LTRO programme also provided some relief to markets.
However, the US is far from immune from the fallout in Europe, which is expected to be felt throughout 2012. It also carries the burden of last summer’s AAA credit rating downgrade, a budget deficit which is on track to exceed $1trn for the fourth straight year and a volatile global picture.
It is also an election year. While there is evidence the US economy usually grows in a year when there are presidential elections, and there seems no reason to believe 2012 will not follow this trend, uncertainty about the outcome, especially during such volatile economic times, could easily unsettle markets.
Despite this, corporate America looks in good shape. Companies are cash rich with strong balance sheets.
Tom Slater, manager of the globally invested Scottish Mortgage investment trust, has over a quarter of his portfolio in US listed equities and is especially bullish on the “world class companies” on the West coast such as Amazon, Apple and Google, which he believes can grow long in the future.
Meanwhile, James Thomson, manager of the Rathbone Global Opportunities fund, has in the past three months decreased his cash position from around 20% to 9%, with most being directed into US equities. His plays include tech, energy and consumer stocks, all of which, he says, are leveraged to an improving economic environment.
Advisers are equally optimistic about the outlook for the US. Dave Penny, managing director of Invest Southwest, says he would certainly include US investments in a balanced, diversified portfolio.
He recommends the Baillie Gifford American fund managed by Mick Brewis. The fund has a fair bias in favour of information technology, in particular Apple, and has been consistently in the top two quartiles in recent years.
He also likes the Schroder US Mid Cap fund, under Jenny Jones, which has consistently performed well over the long term, only slightly underperforming the sector in the last year.
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