Why the US market is the best place in which to invest right now, by top investor

David Jane, who runs the Miton Cautious Multi-Asset fund, has asserted that, with global economic conditions as they are, the US market is the best place in which to invest right now.

 Why the US market is the best place in which to invest right now, by top investor


David Jane, who runs the Miton Cautious Multi-Asset fund, has asserted that, with global economic conditions as they are, the US market is the best place in which to invest right now.

Jane commented, ‘Recent economic data has been beating lowered expectations, most especially in the US. Overall, growth remains low, as does inflation, but this is to be expected when demographics remain unfavourable and the debt burden high. As a consequence equity markets of late have changed tone, with some evidence of a switch away from defensives such as tobacco and consumer goods into more cyclical areas such as the industrials and materials. The same can be said in bond markets, the recent shift down in some government yields has stopped while lower quality corporate bonds have been performing well.’

Read more: What Donald Trump becoming US president would mean for the economy

He continued, ‘As a general rule we don’t try to forecast the future, we merely consider the current state of the evidence, where the attractive risk/reward is on offer and where the momentum is. In terms of evidence, perhaps expectations had been so reduced in the early part of the year that a period of upside surprises was to be expected. There has undoubtedly been some good news though, especially in the US labour market, and the results season has shown a degree of improvement among the industrials. Indeed for the first time since 2014 revenues for the S&P {the largest US stock market index}  are growing, admittedly slowly.’

The fund manager added, ‘On the negative side of the global balance we must still include Europe, where the financial crisis, despite eight years of intervention, remains unfinished business, cropping up most recently with the problems in the Italian banking sector. Negative rates and a dogmatic approach to government intervention are only making resolution harder to achieve, hampering growth and delaying any real recovery in this region. Much of southern Europe still suffers cruel levels of youth unemployment and practical solutions remain as far away as ever. We have a long term theme of a world economy less driven by global trade and more by domestic growth. Its seems to us like a more decoupled world than for some time, with the driver of growth no longer Chinese exports to Western consumers financed by borrowing, coupled with a commodity bubble. Global growth is no longer being led by global trade but to a much greater degree domestic demand. The greatest domestic demand is clearly the US consumer and this economy is faring well, while the fastest growing consumer markets are obviously the emerging markets which have both growing numbers of consumers and growing incomes per consumer. From this point of view strength in the US and emerging markets and weakness in Europe is unsurprising.’

Jane continued that, ‘It could be argued that the conditions of persistent low interest rates, with the US unable to raise rates to the degree otherwise merited for fear of causing instability elsewhere, could lead to a ‘goldilocks’ period for real dollar assets. Indeed, even if the Fed feels able to raise short term interest rates, money will naturally flow into the dollar when the outlook for the US is superior to other developed markets, and US interest rates remain higher than elsewhere. Hence, US real assets may be at a sweet spot with a strong dollar, weight of money and attractive relative value, while US fixed income also appears much better value than those in other developed markets, at least offering some nominal yield.’

Turning his thoughts to the equity markets he said, ‘We remain comfortable with our bias towards US and emerging market equity within our equity positions and over the past few weeks we have been moving to a slightly more cyclical positioning, reducing some of the positions in the defensive equities. In fixed income we have been taking the same approach, a slight move away from long duration government bonds into corporates which can benefit from an improving outlook in the US. Obviously, our UK corporates have been huge beneficiaries of the shift down in yields and now the Bank of England’s bond buying programme, so we can find much less value in the investment grade area. Now we must look elsewhere, and the US with higher rates and a stronger economy appears to be the place to go.’

The Miton Cautious Multi-Asset fund has returned 11 per cent over the past year, compared to 7 per cent for the average fund in the IA Mixed Investment 20-60 per cent sector.

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