There are lots of places to invest, it’s just understanding where, when and how?
On many investors’ minds is the issue of whether to ignore the US or not, especially with a weaker dollar. Read on to understand the considerations.
There is so much going on in the world that I feel we need to cover, that my state pension evaluation and comparison, which I promised to write about last week, will have to wait.
The eye of the storm for the US?
Equity markets continue to climb up the wall of worry, particularly outside of the US. However, the US has recovered strongly since early April, when the ViX index (fear gauge) rocketed on the back of Trump’s tariffs.
This week, I’m going to provide more of a perspective on the US, paraphrasing Morningstar’s excellent insight on the market value of US stocks, the potential issues and recommended positioning for investors. Morningstar are a trusted portfolio management system and investment analysis platform.
I’m also going to provide some comment on the prospect of a further weakening of the dollar – just as the dollar hit a 3-year low yesterday on Trump’s announcement that within the next two weeks he will send letters to the US’s trading partners. Trump wanted a lower dollar and he’s doing his very best to drive the currency down. I suppose the question is, how far can he afford for it to fall?
China’s currency is gaining traction, just as it appears that the US and China have agreed on the basic terms of a deal on tariffs.
So, a more focused market commentary from us this week, but it does help address some of the nuances and queries that have arisen from our discussions with clients, external investment managers and between ourselves, here at Blue Sky. Regardless, it pays to keep a cool head and not be caught up in the noise. Some analysts believe that US equities look attractive as institutional managers have been slow to buy into the recovery we’ve seen since early April. As a result, they have increased their forecast for the S&P 500.
This week’s content:
- The US outlook according to Morningstar
- The dollar may no longer be ‘Top Trumps’
- The US and China agree on the fundamentals of a trade deal
- Expect US stocks to rally
- Summary
The US outlook according to Morningstar
As of the 30th May 2025, the US stock market was trading at only a 3% discount to fair value. That’s close to the mid-point where it is deemed that half the time, the market trades at a higher valuation and half the time at a lower valuation. Simples! By way of perspective, on 4th April, it was operating at a 17% discount.
Morningstar locked in some of the gains as the market recovered and is no longer overweight on US equities, but is holding what they call market weighted average. A tool used to determine trend direction.
Continues…
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Risk warning
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.