US fund "ideas"

aroominyork

I think 'ideas' must be my least favourite word in the investing lexicogaphy, and I pay scant attention to their relentless churn on the platforms' sites. But HL today said "There are good reasons to believe that the impact (of Trump's victory) on the US stock market could be positive, and particularly so for smaller companies.Why? Because trade tariffs favour domestic businesses over international conglomerates, and smaller companies are usually more domestically focused."

There seems some logic there. I used to own a US smaller companies fund, selling it in late 2022 shortly before, fortuitously, the sector started underforming US large caps. Maybe it's time to dip a toe back in. Thoughts...?

InvesterJones

Too late - traders have already beaten you to it. Now could in fact be a good time to sell US, depends how long term your view is.

aroominyork

Nonsense. US small caps rising a couple of % more than large caps today is just an initial reaction. It's not like they shot up 30%.

wmb194

aroominyork said:

I think 'ideas' must be my least favourite word in the investing lexicogaphy, and I pay scant attention to their relentless churn on the platforms' sites. But HL today said "There are good reasons to believe that the impact (of Trump's victory) on the US stock market could be positive, and particularly so for smaller companies.Why? Because trade tariffs favour domestic businesses over international conglomerates, and smaller companies are usually more domestically focused."

There seems some logic there. I used to own a US smaller companies fund, selling it in late 2022 shortly before, fortuitously, the sector started underforming US large caps. Maybe it's time to dip a toe back in. Thoughts...?

I don't know anything about it but there's at least one investment trust that specialises in US "smaller" companies, JPMorgan US Smaller Companies IT LSE:JUSC. Today it looks like it's popped 6.83%.

https://am.jpmorgan.com/gb/en/asset-management/per/products/jpmorgan-us-smaller-companies-investment-trust-plc-gb00bjl5f346

masonic

As it happens I bought some SPX4 on Monday. Only 5% to my 45% CSP1 in order to broaden my broadly market cap-weighted US exposure. I had then been meaning to sell some CSP1 to bring my allocation back to 45%, for which the opportunity came today. Lucky timing on both counts for once. I also finally took the opportunity to reintroduce a small holding of global aggregate bonds into my portfolio.

Albermarle

aroominyork said:

I think 'ideas' must be my least favourite word in the investing lexicogaphy, and I pay scant attention to their relentless churn on the platforms' sites. But HL today said "There are good reasons to believe that the impact (of Trump's victory) on the US stock market could be positive, and particularly so for smaller companies.Why? Because trade tariffs favour domestic businesses over international conglomerates, and smaller companies are usually more domestically focused."

There seems some logic there. I used to own a US smaller companies fund, selling it in late 2022 shortly before, fortuitously, the sector started underforming US large caps. Maybe it's time to dip a toe back in. Thoughts...?

If the US imposes trade tariffs on some UK goods, then presumably we will do the same with some US goods. So we might have to make more things ourselves which could benefit FTSE 250 companies ?

Although more likely I guess we will just buy them from Europe or China instead.

aroominyork

masonic said:

As it happens I bought some SPX4 on Monday. Only 5% to my 45% CSP1 in order to broaden my broadly market cap-weighted US exposure. I had then been meaning to sell some CSP1 to bring my allocation back to 45%, for which the opportunity came today. Lucky timing on both counts for once. I also finally took the opportunity to reintroduce a small holding of global aggregate bonds into my portfolio.

If tariffs are the catalyst for small/mid caps to do well, don't you think some sectors will benefit more than others and an actively managed fund might outperform?

masonic

aroominyork said:

masonic said:

As it happens I bought some SPX4 on Monday. Only 5% to my 45% CSP1 in order to broaden my broadly market cap-weighted US exposure. I had then been meaning to sell some CSP1 to bring my allocation back to 45%, for which the opportunity came today. Lucky timing on both counts for once. I also finally took the opportunity to reintroduce a small holding of global aggregate bonds into my portfolio.

If tariffs are the catalyst for small/mid caps to do well, don't you think some sectors will benefit more than others and an actively managed fund might outperform?

It is undoubtedly true that whether or not tariffs materialise, some sectors will do better than others. I don't know which active fund manager will place a more concentrated bet on the right sectors than the market in aggregate. If it wasn't clear from my previous post, I did not try to predict the outcome or consequences of the election, just a lucky coincidence that I'd timed well something I'd already been considering doing.

It's worth remembering that power is kryptonite for populists. It is much harder to hide the negative aspects of their policies when they have to put them into practice. It was somewhat established during the campaigns that the average American was unaware that tariffs would mean Americans would need to pay more for goods and services.

aroominyork

All agreed, and tariffs could well be a threat to hold over other countries when seeking something else. But, more in line with your strategy and not having looked at US smaller companies for a couple of years - during which they have lagged as the Mag7 fuelled large caps steaming ahead (for once not mixing my metaphors!) - they are an interesting 'idea'.

masonic

I like anything that can dilute the Mag7 concentration. Ideally I'd like to have a more significant US smallcap allocation, but the US market is one where the small cap premium doesn't seem to exist in the way it does elsewhere in the world (esp UK). I just settled for holding the mid-cap ETF, weighted a little above its natural market cap.

aroominyork

Yup, and the lack of small cap premium is why I sold US small caps a couple of years back and generally stick with the index in the US - very little outperforms in the large cap space too. Buying it again now (and, looking some more at SPX4, I see your rationale) would more more tactical than long-term strategic. Have you thought about XDPG, equal weighting the S&P?