Our exposure to US equities has been fairly light for some time, a position that on the face of it hasn’t worked for us.
US equities are expensive and their outperformance has only made them more so. Sure, US companies are generally considered more dynamic and better managed than your average non-US company, but there is a price for everything. We think current prices are too high, and more than account for the better quality. For example, the dividend yield of US equities is 2.2%, compared with 4.6% in the UK, 3.5% in Europe and 3.4% in non-Japan Asia. The gap we think is too big.
That said, in the case of our flagship investment trust, we’ve been getting exposure through a high dividend ETF and a high dividend-oriented actively managed fund. The combination has significantly outperformed the broad US market over the last year, so it hasn’t really mattered that we’ve been underweight.
Published in Investment Week
The views expressed in this communication are those of Peter Elston at the time of writing and are subject to change without notice. They do not constitute investment advice and whilst all reasonable efforts have been used to ensure the accuracy of the information contained in this communication, the reliability, completeness or accuracy of the content cannot be guaranteed. This communication provides information for professional use only and should not be relied upon by retail investors as the sole basis for investment.