The Lemon Fool

I've tinkered a little with my funds - mainly all global trackers, mainly ETFs and a wadge of Fundsmith - biasing them a little more towards the US with purchase of VUSA. I appreciate we have no crystal ball, but what do folks think? IMHO it could be OK for growth for the next year or so, and opinion on the web seems to back this up, but after that?

I have in the past been underweight in the USA (because often I saw it had had a recent rise and thought "that won't happen again soon", but it has). So recently my new investment, and some rebalancing, has been into a normal S&P 500 tracker. But the recent rise has got me thinking "it can't last" again, and it seems to have been the big tech firms driving the latest rise. So I've just switched this month to buying an S&P 500 Equal Weight tracker instead - slightly higher charges (about 0.20% pa), but historically, the equal weight index tends to catch up with the market cap one. I'll still end up with significantly more in the market cap version, but I feel this may avoid buying at quite such a peak. We'll see.

Oggy wrote:I've tinkered a little with my funds - mainly all global trackers, mainly ETFs and a wadge of Fundsmith - biasing them a little more towards the US with purchase of VUSA. I appreciate we have no crystal ball, but what do folks think? IMHO it could be OK for growth for the next year or so, and opinion on the web seems to back this up, but after that?

There is a school of thought that the big US tech firms are in a dotcomish bubble.

V8

88V8 wrote:

Oggy wrote:I've tinkered a little with my funds - mainly all global trackers, mainly ETFs and a wadge of Fundsmith - biasing them a little more towards the US with purchase of VUSA. I appreciate we have no crystal ball, but what do folks think? IMHO it could be OK for growth for the next year or so, and opinion on the web seems to back this up, but after that?

There is a school of thought that the big US tech firms are in a dotcomish bubble.

V8

That school of thought is a bit ignorant though. The dotcom bubble was led by companies that had little revenue and no profits. The large US technology companies leading the charge today are the most profitable large companies ever to have existed and they are growing revenues fast. Valuing such companies is difficult, and they may get ahead of themselves, but it’s lazy to compare them to the dotcom bubble.

I have in the past been underweight in the USA (because often I saw it had had a recent rise and thought "that won't happen again soon", but it has). So recently my new investment, and some rebalancing, has been into a normal S&P 500 tracker. But the recent rise has got me thinking "it can't last" again, and it seems to have been the big tech firms driving the latest rise. So I've just switched this month to buying an S&P 500 Equal Weight tracker instead - slightly higher charges (about 0.20% pa), but historically, the equal weight index tends to catch up with the market cap one. I'll still end up with significantly more in the market cap version, but I feel this may avoid buying at quite such a peak. We'll see.

Interesting thought. Any such equal weight trackers on offer at HL/AJ Bell?

I get the comments on the large tech companies - I also have some funds in the L&G Tech class C and RSGL. To my simple mind, such large companies seem reasonably robust and would stay the course for a few years yet. Difficult to see Microsoft and Apple etc. going bust....

simoan wrote:

88V8 wrote:There is a school of thought that the big US tech firms are in a dotcomish bubble.

V8

That school of thought is a bit ignorant though. The dotcom bubble was led by companies that had little revenue and no profits.

Ah yes, those were the days when little tech companies sold £1 coins for 90p and generated fantasic turnover. Of course when it came to trying to turn a profit, the model collapsed

Turnover is vanity...etc...etc

There even used to be a shares channel on satellite TV pumping up anything and everything

Interesting thought. Any such equal weight trackers on offer at HL/AJ Bell?

To answer my own question, SPEQ seems to be available on AJ Bell. Performance not great, but only been going 3 years or so. Difficult to predict I suppose, but arguably less risk than Market Cap. S&P

Hi all, I've found UK GDP per capita at USD52,430 per the IMF -
https://www.imf.org/external/datamapper ... BR/DEU/GRC

This only beats Mississipi of all the American states...
https://en.wikipedia.org/wiki/List_of_U ... ies_by_GDP

On that stat alone, I'm invested in US rather than UK equities

bots33 wrote:Hi all, I've found UK GDP per capita at USD52,430 per the IMF -
https://www.imf.org/external/datamapper ... BR/DEU/GRC

This only beats Mississipi of all the American states...
https://en.wikipedia.org/wiki/List_of_U ... ies_by_GDP

On that stat alone, I'm invested in US rather than UK equities

So on that basis, hypothetically, if the US market doubled and the UK market halved would you still base your decision on gdp per capita and nothing else?

Oggy wrote:

Interesting thought. Any such equal weight trackers on offer at HL/AJ Bell?

To answer my own question, SPEQ seems to be available on AJ Bell. Performance not great, but only been going 3 years or so. Difficult to predict I suppose, but arguably less risk than Market Cap. S&P

I am using SPEX there - still Invesco, but the GBP-denominated version. There is also XDWE - XTrackers S&P 500 Equal Weight, which has roughly the same charges (some list it as 0.20%, some 0.25% - difference in which year was evaluated?), a larger unit price, but has a track record back to 2014 (note there is a GBP hedged version, which you may or may not want).

https://www2.trustnet.com/Tools/Chartin ... G22Q,FQ4P1

Overall, it hasn't kept up over 10 years, but, for instance, match the market cap index from January 2020 (just before covid) to about April 2023.

It's not that I see the huge tech firms going bust (even Tesla, which has, I reckon, the shakiest fundamentals, should avoid that), but they may be overvalued right now.

Dicky99 wrote:

bots33 wrote:Hi all, I've found UK GDP per capita at USD52,430 per the IMF -
https://www.imf.org/external/datamapper ... BR/DEU/GRC

This only beats Mississipi of all the American states...
https://en.wikipedia.org/wiki/List_of_U ... ies_by_GDP

On that stat alone, I'm invested in US rather than UK equities

So on that basis, hypothetically, if the US market doubled and the UK market halved would you still base your decision on gdp per capita and nothing else?

I should think he'd be sipping cocktails on a Caribbean beach having been proved absolutely correct in his investment call.


GS

Dicky99 wrote:

bots33 wrote:Hi all, I've found UK GDP per capita at USD52,430 per the IMF -
https://www.imf.org/external/datamapper ... BR/DEU/GRC

This only beats Mississipi of all the American states...
https://en.wikipedia.org/wiki/List_of_U ... ies_by_GDP

On that stat alone, I'm invested in US rather than UK equities

So on that basis, hypothetically, if the US market doubled and the UK market halved would you still base your decision on gdp per capita and nothing else?

And one might expect an even better RoI from the RoI?

I am using SPEX there - still Invesco, but the GBP-denominated version. There is also XDWE - XTrackers S&P 500 Equal Weight, which has roughly the same charges (some list it as 0.20%, some 0.25% - difference in which year was evaluated?), a larger unit price, but has a track record back to 2014 (note there is a GBP hedged version, which you may or may not want).

https://www2.trustnet.com/Tools/Chartin ... G22Q,FQ4P1

Overall, it hasn't kept up over 10 years, but, for instance, match the market cap index from January 2020 (just before covid) to about April 2023.

It's not that I see the huge tech firms going bust (even Tesla, which has, I reckon, the shakiest fundamentals, should avoid that), but they may be overvalued right now.

My thanks for all of that. I've gone for SPEX with AJ Bell. I too share the concern with the major tech firms being overvalued, but it is a fairly mild one - for now.....

Over the medium and longer term I far prefer America over every other country. America is arguably the most business friendly country in the Western world and the contrast between it and Britain is getting larger. America's political class, whilst being highly dysfunctional, is pro-business. Britain's political class, whilst not being as dysfunctional, is generally hostile towards business and sees it as a cash cow to be milked rather than encouraged.

America has much cheaper electricity prices than Britain (and EU countries) and isn't pursuing policies designed to substantially cut food production (the recent unrest by Dutch farmers over closing farms has gone largely unnoticed by our political and media class, IMHO it's a huge warning sign). In short America is a much better place in which to invest.

The short-term is highly debeateable, as others have pointed out, because a big part of the American stockmarket is in tech stocks and the valuations are a somewhat reminiscent of the late 1990s dotcom boom. However, todays tech companies are profitable and have solid businesses with substantial moats to protect their position. Whereas 1990s dotcom businesses were loss makers usually sellling easily commoditised products, whilst herd behaviour caused many to think that they were good investments (back then the investing public loved to threw money at any old rubbish (e.g. pets.com) as long as it had .com in its name).

3% of my portfolio is in VUSA (Vanguard's S&P 500 tracker) with a further 40% in American operating companies (followed by 17% in Canada). My British investments are less than 5% (I view my British multinational shareholdings as "international" rather than "British" because they make the vast majority of their money outside the UK).

SalvorHardin wrote:3% of my portfolio is in VUSA (Vanguard's S&P 500 tracker) with a further 40% in American operating companies (followed by 17% in Canada). My British investments are less than 5% (I view my British multinational shareholdings as "international" rather than "British" because they make the vast majority of their money outside the UK).

Ironically 5% in the UK is overweight. The UK market cap is about 4% of global market cap. In terms of global GDP, less than that.

I am aiming in the new tax year to have nothing in the UK, and not much in Europe. It quite simply is not necessary. North America and Asia (especially Japan and India) are the places to be.

Lootman wrote:Ironically 5% in the UK is overweight. The UK market cap is about 4% of global market cap. In terms of global GDP, less than that.

I am aiming in the new tax year to have nothing in the UK, and not much in Europe. It quite simply is not necessary. North America and Asia (especially Japan and India) are the places to be.

My British 5% is Derwent London, Great Portland Estates, Shaftesbury Capital (Central London property) plus Wetherspoons. All four are recovery plays. Also some Games Workshop, which is a much stronger hold for me.

Though with parts of London increasingly looking like Third World slums and the ongoing breakdown in law and order (thanks to the Metropolitan Police's two tier justice policy), I'm having a think about selling the property companies.

Yes - largely agree with previous 3 posts. I too limit UK to about 4% as per my global funds and I don't see the UK economy going anywhere anyways. My concern is that I am about 80% in the US. No bad thing for growth, not great for diversity/risk perhaps. Hence I am looking around for a global fund with less US bias than the usual 60/70 odd percent or else a global fund ex US which has decent growth. Tricky.....

Oggy wrote:Yes - largely agree with previous 3 posts. I too limit UK to about 4% as per my global funds and I don't see the UK economy going anywhere anyways. My concern is that I am about 80% in the US. No bad thing for growth, not great for diversity/risk perhaps. Hence I am looking around for a global fund with less US bias than the usual 60/70 odd percent or else a global fund ex US which has decent growth. Tricky.....

The trouble is, investing in UK companies is not the same as investing in the UK economy. There seems to be a lot of recency bias going on in the PI world and I have read comments elsewhere of people talking about dumping their UK holdings and investing everything in the US. Nothing screams over extended bull run more to me and they are simply momentum investing. Now, I have a lot of time for momentum investing (don't sell your winners etc.) but it makes no sense to me in buying with total disregard to valuation. I agree that everyone should have significant exposure to the best US stocks but I cannot bring myself to buy the whole market. No doubt, the S&P 500 has some world leading companies across a number of sectors, but it still leaves you with ~30% exposure to financials, consumer discretionary, energy and material sectors that I do not want any exposure to. The situation is even worse if you go the equal weighted S&P500 root.

simoan wrote:The situation is even worse if you go the equal weighted S&P500 root.

Yes, definitely no way to beet the market

CryptoPlankton wrote:

simoan wrote:The situation is even worse if you go the equal weighted S&P500 root.

Yes, definitely no way to beet the market

Yes, very good! What are your thoughts on the US economy and S&P 500?