Miton’s Nick Ford: Onwards and Upwards for the US Economy

• Economic growth in the US is accelerating
• Reason will return to the White House on trade tariffs
• Homebuilding industry should continue to prosper
• The entrepreneurial spirit in America remains alive and well

Nick Ford, Fund Manager of the LF Miton US Opportunities Fund comments:

“We remain extremely optimistic on the prospects of continued growth for the world’s largest economy. Our recent company meetings found management teams broadly optimistic and upbeat across a wide cross section of industries. These views are inconsistent with the notion of any impending slowdown or recession. If anything, US corporations have suggested that economic growth is actually accelerating.

“Trump’s proposed tariffs have gained a lot of investor attention but we believe reason will eventually return to the White House, as it becomes clear that the costs of a trade war will outweigh the benefits. Trump wants to maintain his image as a champion of blue collar workers and tariff talk is all about placating his supporters.  It’s important to Trump to preserve his legacy of stronger economic growth and a rising equity market. So his goal is likely to be narrow tariffs with limited economic downside.  Rising unemployment and falling markets are not conducive to his goal of ‘making America great again’. Any tariffs are likely to be narrow in impact (now that Canada and Mexico are excluded) with limited economic impact.  As this becomes clear we should start to see equity markets recover over the coming weeks.

“Looking at the broader US picture we see a healthy housing sector. This industry remains forefront in investors’ minds given the subprime lending crisis prompted the last economic downturn. Leading player Toll Brothers has been able to raise the average price of its homes for sale by 6.8% from 12 months ago with demand driven by jobs growth, wage increases and new buying interest from millennials. With household net worth at record highs and the amount spent by consumers to service their debt, as a percentage of disposable income, near historic lows, homebuilders should continue to prosper.

“Elsewhere, companies in sectors where the outlooks are less tied to the economy continue to benefit from tremendous innovation, suggesting the entrepreneurial spirit in America remains alive and well. With corporate profits on the rise, more money can be allocated to research and development to drive exciting and revolutionary new products and services. In particular, many smaller companies look well-positioned now they have ready access to financing from a reinvigorated banking sector. Examples within healthcare include Nuance and Vocera Communications which are both using speech recognition coupled with artificial intelligence to slash the bureaucracy associated with creating and retrieving patient records.  This allows instant interaction between medical professionals to determine optimal treatment plans.

“We remain confident that positive growth will only continue to accelerate across a variety of sectors.”

• Economic growth in the US is accelerating
• Reason will return to the White House on trade tariffs
• Homebuilding industry should continue to prosper
• The entrepreneurial spirit in America remains alive and well

Nick Ford, Fund Manager of the LF Miton US Opportunities Fund comments:

“We remain extremely optimistic on the prospects of continued growth for the world’s largest economy. Our recent company meetings found management teams broadly optimistic and upbeat across a wide cross section of industries. These views are inconsistent with the notion of any impending slowdown or recession. If anything, US corporations have suggested that economic growth is actually accelerating.

“Trump’s proposed tariffs have gained a lot of investor attention but we believe reason will eventually return to the White House, as it becomes clear that the costs of a trade war will outweigh the benefits. Trump wants to maintain his image as a champion of blue collar workers and tariff talk is all about placating his supporters.  It’s important to Trump to preserve his legacy of stronger economic growth and a rising equity market. So his goal is likely to be narrow tariffs with limited economic downside.  Rising unemployment and falling markets are not conducive to his goal of ‘making America great again’. Any tariffs are likely to be narrow in impact (now that Canada and Mexico are excluded) with limited economic impact.  As this becomes clear we should start to see equity markets recover over the coming weeks.

“Looking at the broader US picture we see a healthy housing sector. This industry remains forefront in investors’ minds given the subprime lending crisis prompted the last economic downturn. Leading player Toll Brothers has been able to raise the average price of its homes for sale by 6.8% from 12 months ago with demand driven by jobs growth, wage increases and new buying interest from millennials. With household net worth at record highs and the amount spent by consumers to service their debt, as a percentage of disposable income, near historic lows, homebuilders should continue to prosper.

“Elsewhere, companies in sectors where the outlooks are less tied to the economy continue to benefit from tremendous innovation, suggesting the entrepreneurial spirit in America remains alive and well. With corporate profits on the rise, more money can be allocated to research and development to drive exciting and revolutionary new products and services. In particular, many smaller companies look well-positioned now they have ready access to financing from a reinvigorated banking sector. Examples within healthcare include Nuance and Vocera Communications which are both using speech recognition coupled with artificial intelligence to slash the bureaucracy associated with creating and retrieving patient records.  This allows instant interaction between medical professionals to determine optimal treatment plans.

“We remain confident that positive growth will only continue to accelerate across a variety of sectors.”