The manager of the Newton American fund, Simon Laing, says he is pretty upbeat about the recovery in the economy and the stock market.
His optimism is centred mainly on the first half of 2010 and he suggests there might be a pause for breath in the latter part of the year.
As a thematic investment house, Newton attempts to predict what will influence investment returns in the future and then seeks to ensure that it picks companies in the sectors it feels have the greatest chance of benefiting from these themes.
Although these themes have meant a very negative stance on banks worldwide over the past two years, Mr Laing said that this was not so pronounced in the US.
He said: “In my fund, I can be a lot more supportive of the sector than my colleagues in the UK and Europe due to the policy differences.
“For example, the US banks have been allowed to repay their Tarp (Troubled Asset Relief Programme) stakes quickly, with Citigroup being the only remaining major bank with a government stake.”
Meeting the management of the companies in which he invests regularly has helped to reinforce his opinion that the 2-3% consensus forecast for 2010 GDP growth is reasonable.
Mr Laing said: “Although the management teams are generally only slightly more optimistic than they were earlier in the year, after this quarter there will have been two successive quarters of GDP growth in the US on the back of the worst recession the management and boards of directors have ever lived through.
“The appetite for capital expenditure will return.”
The fund manager likes the healthcare and technology sectors and said: “We don’t always have to buy directly into handset companies; we can buy a company like Qualcomm which makes the chips that go into 3G phone handsets. In healthcare, valuations have been beaten up too much. The stocks will not roar, but if there is some disappointment later in 2010, people will look at what they’re paying for companies more closely. The National Institutes of Health had a $10billion increase to its $30billion budget. That will provide significant impetus for the healthcare sector.”
The fund has returned 31.9% over the 12 months to December 17, 2009, compared to 21.9% from the average fund in the sector.
Barry O’Neill is a chartered financial planner with Thomson Shepherd. Contact him on 01224 619215