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Signia’s Ammalan Annalingam, Co-Head of Multi-Asset Investments, responds to Wealth Managers conversation on 'US Strategy and Tech'

Ammalan Annalingam

Published 25/11/2020

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Signia’s Ammalan Annalingam, Co-Head of Multi-Asset Investments, responds to Wealth Managers conversation on 'US Strategy and Tech'

Wealth Manager asks wealth managers: 'What is your US Strategy?  Is it all about Tech?'

Big tech has dominated US returns in recent years, but with a vaccine close, we ask wealth managers whether smaller and mid-cap stocks are about to shine.

 

Ammalan Annalingam, Co-Head of Multi-Asset Investments responds...

The past few weeks have been heavy on news flow, with the US elections and the vaccine announcement.  Clearly in the near term, we would expect cyclicals to outperform tech if and when more positive vaccine news gets announced.  The MSCI USA Value index, which contains those sectors hit hardest by the pandemic, has underperformed the MSCI North America index by 21% year to date. 

Looking further ahead, however, a fiscally constrained Democratic party will struggle to implement their intended spending plans meaning growth will remain scarce.

In such a scenario, investors will be willing to pay up for companies with compounding cashflows and double-digit growth projections.  The best examples of companies that have this criterion are tech companies.

Although tech firms may underperform in the near term, they are unlikely to materially sell off unless interest rates meaningfully rise.  This does not look imminent, vaccine or no vaccine.

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