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Investment view

By the time you read this, the outcome of the US presidential election should be known. This has been one of the closest run contests ever, so I will not embarrass myself by try ing to second-guess what will be in the public domain just a few days hence. Perhaps it is not surprising the US stockmarket seems to be coming in for a lot of attention at present. The health of capitalism&#39s bastion is a concern for us all and mixed views are being expressed on what the future may hold.

Hitting my desk recently was a note from HSBC&#39s Robin Griffiths reaffirming his bullish stance on US shares. Having prematurely called the turn of the Nasdaq in October, I imagine Robin will have been sweating a little during recent trading sessions, even if we did have one of the biggest-ever single-day rises in this volatile index last week. Robin, of course, is looking at things purely (well, fairly purely) from a technical analysis standpoint, so you could argue he should not be taking into account such imponderables as a US hard landing or the ballooning trade deficit.

He has fundamental support from the likes of Logie Cassells from our sister company, Capel Cure Sharp, who points to the highly favourable demographics in the US as supporting continued high levels of consumer spending. Coup led with the remarkable success of our transatlantic cou sins in the field of technology, this should help restimulate interest in US equities and Nasdaq stocks in particular, in his view. If the performance of the Hallmark funds he runs is anything to go by, Logie is someone to whom you should pay attention.

The counter-view is expressed by Professor Tim Cong don in his monthly economic review. Tim is no longer strictly part of the home team as his economic consultancy – Lombard Street Research – has executed an MBO from our parent company. Still, he has been kind enough to leave me on his mailing list and, maintaining a degree of consistency that is not necessarily the app roach of all economists, contends that the US trade deficit is uns ustainably high and the produc tivity advances which the US has trumpeted are largely illusory. More worryingly, he points to a trade deficit in high-tech goods, which is only just counter-balanced by a surplus in services. The US needs to export considerably more if the external account is to be restored to sustainable levels. This will almost certainly need a fall in the value of the dollar to accomplish. There seems no sign of that at present.

It may be we have seen the bottom of the euro although Tim is predictably pessimistic over this currency as well. However, if we do see higher interest rates in Europe and an end to the rise in the cost of money in the US, perhaps some adjustment could take place. Talking to a senior executive at the massive mortgage facilitator Freddie Mac (only Amer ica could have corporations with names like Freddie Mac and Fannie Mae), I was told it would not be surprised if no further rate increases are forthcoming from the Fed. If this is so, there is a case for calling the turn between the dollar and both the euro and yen. Unf or tun ately, we will only know well after the event just how accurate such a call would have been.

All of which reminds me that John Kenneth Galbraith once said there are two kinds of forecasters – those who do not know and those who do not know they do not know.I would like to think I fall into the former category but am still pinning my faith on a continuation of the autumn rally, both here and on the other side of the pond. I have not yet bought those euros I promised myself as a possible deposit on a home in warmer climes. Perhaps I will find I have missed the boat. Tim clearly does not think I have. I just know that I do not know which view will prove to be correct.


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