Australian investment manager Munro Partners remains bullish on US equities but cautious of trade risks and rising rates.
The Munro Global Growth Fund returned 0.9 of a percentage point in September. Equities delivered 1.1 per cent growth while currency took 20 basis points off the total return.
From a stock perspective, the fund’s top pick was Activision Blizzard, the US-listed video game publisher; robotics company Blue Prism and Boeing, the Seattle-based aircraft manufacturer.
“We continue to believe US equity markets can grind higher supported by strong corporate earnings growth; however, this requires a normalisation of interest rates without materially slowing the US economy,” Munro’s chief investment officer Nick Griffin said.
“We are mindful of some recent signs of an increase in wage inflation, however there remains strong structural disinflationary forces, such as technological advancement.”
Mr Griffin said the firm is increasingly being asked about the growing performance discrepancy between the US market and the rest of the world (Europe +1.6 per cent and Hong Kong ‐4.1 per cent YTD).
“While it is tempting to conclude that companies in these regions may therefore be more attractive on a go forward basis, we note that it continues to be the US corporates that are driving the strongest earnings growth, and since stocks ultimately follow earnings, the performance dispersion is warranted,” he said.
“Aside from interest rates and inflation, risks to our moderately bullish thesis are: trade tensions (and subsequent economic growth risks); emerging markets weakness (contagion from Turkey, Argentina); and politics (any negatives coming out of the upcoming US mid‐term elections). However, for now at least these issues seem to be contained.”
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