View more on these topics

Brian Tora: Time for cautious optimism on the US


Knowing that the outcome of the referendum on Scotland’s independence will have been done to death by the time you read this, it seemed an opportune moment to cast my eyes across the Atlantic Ocean to the good old US of A for my take on investment.

Fortunately, James Abate was on hand last week, fresh from the Big Apple, to share his views on what’s hot and what’s not in the US.

Abate runs the PSigma American Fund (or should that be the Miton American Fund now?) from his New York based Centre Asset Management. His association with what was the PSigma investment funds business, until it merged with Miton earlier this year, stems from his time as a fund manager with Credit Suisse, from where the PSigma London team came.

Abate’s approach is to concentrate on large cap stocks only, building a concentrated, high conviction portfolio.

While the tone of Abate’s comments at a lunch I attended last week was generally upbeat, there were some cautionary noises in the background.

By his measure, the US market was expensive – even more so than in 2000, just ahead of the tech bubble bursting and a bear market setting in. But there were no signs that the market was becoming overhyped to the extent that a serious retrenchment was likely.

Part of the reason for remaining optimistic was that margins were historically high, thanks to some severe cost-cutting in the wake of the financial crisis. Perhaps because the turmoil that followed the collapse of Lehman Brothers was still fresh in corporate memories, there was little sign of indiscriminate spending. Indeed, the banks were hardly in a position to deal out large sums of cash, while mergers and acquisition activity, admittedly present, had yet to take off in an unhealthy manner.

In Abate’s view it was all about stock selection. And this is where the caution manifested itself. His portfolio was becoming increasingly defensive. Utilities, railroads and aggregates all featured strongly, while consumer stocks were being phased out. Earnings were still rising faster than asset prices, in Abate’s view, but the re-rating this allowed would come to an end. The good news was that he didn’t see a bear market re-emerging until interest rates started to rise and this did not seem likely until wage settlements topped 3 per cent.

But he also felt globalisation was in retreat. In the past, buying well known consumer brands – often American – was what the aspirational developing world wanted to do. Today, he felt these brands hold less sway. And with geo-political issues still abundant, Abate felt there were a few worries to unsettle investors.

All in all it made good sense, but knowing that several asset allocators have upped US exposure because of the uncertain outlook for Europe, I did wonder what might happen if Wall Street suddenly went into reverse.

The problem, of course, is the lack of alternatives. With cash returning virtually nothing and government bonds still in demand as a safe haven, equities look reasonable value on a comparative basis, even if they are dear historically. I was comforted by the knowledge that there were few signs of the sort of excess that tends to characterise the tops of bull markets, but I did come away with the view that returns in the future could be muted.

That there is an appetite for risk is undoubted. Look at the demand Alibaba has generated in its New York IPO.

The world has changed, though. Central banks hold more sway than used to be the case. And the whole business of investment has become more concentrated. The good news is that this should help stock pickers like Abate. I look to the future in the US with cautious optimism, but limited expectations.

Brian Tora is an associate with investment managers JM Finn & Co



Nic Cicutti: Advisers wouldn’t have changed without the FCA

One of the things I find about Money Marketing is no matter how assiduously you read it, little gems slip through the net. It is only a week or two later, perhaps when you are directed there by someone else, that you get a change to study them properly. So I am grateful to Informed […]


Apfa announces Towry as latest member

Apfa has announced that wealth management firm Towry has become a member of the trade body. Towry employs around 750 staff in 21 offices across the UK, managing £6bn of client assets. Apfa director general Chris Hannant says: 
“We are delighted to be able to announce Towry as new members of Apfa. “As we celebrate […]


Ukip wants to scrap inheritance tax

Ukip is promising to scrap inheritance tax as it proposes a 5 per cent VAT increase on luxury goods. Delivering his keynote speech on the economy at its annual conference in Doncaster today, Ukip economic spokesman and MEP Patrick O’Flynn said the super-rich don’t pay inheritance tax anyway. He said: “Let me tell you what […]


Cass Business School: Markets threatened by pension fund ‘herding’

Pension funds are threatening to destabilise financial markets by “herding” in and out of asset classes at the same time, new research warns. A study by the Cass Business School, titled ‘The market for lemmings: Is the investment behaviour of pension funds stabilising or destabilising?’, concludes that market stability is being “put at risk” as […]

Auto-enrolment: tips for employers

The Pensions Regulator (TPR) has released advice on communications for employers, including three tips to help you with your auto-enrolment duties. 1. Allow enough time to select your pension schemeIt’s recommended that you start to prepare for auto-enrolment at least 12 months in advance of your staging date; additionally, give yourself time to choose the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm