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In US it’s back to the future. Road trip sees Rathbones’ Coombs upbeat

27 June 2018

Never mind the gloomy talk of “late-cycle capitalism”, the US is booming right now, argues David Coombs. Fresh from a jam-packed trip across the Atlantic, Rathbones’ head of multi-asset investments thinks infrastructure is a bit of a throw-back, but there’s a definite buzz in the air.

I feel like Doc Brown, staggering out of an obsolete contraption that took me back to the future and, well, back home again.

For years I’ve believed that the US is the true growth engine of the world and the place that sports many of the very best companies. But it’s been a few years since I’ve crossed the pond. I thought it was time I took a first-hand look at arguably one of our most important investment markets. My six-day trip was a white-knuckle ride filled from top to bottom with meetings. Unfortunately I was zigzagging across the Atlantic and America in clapped-out Boeings, rather than a retro-fitted DeLorean.

I was joined by our global equities analyst and Heritage Fund manager, David Harrison, an ’80s kid who probably spent more than his fair share of time watching Marty McFly. We didn’t spot any hoverboards on our travels, but we did see office scooters, oodles of confidence and quite a few great American diners. In our opinion there’s plenty of road for America to get to 88 miles per hour …

The US is humming right now. True, Americans are known for being ultra-chirpy at the worst of times, but this goes beyond that. We met 14 companies across four states, from the East Coast to the South and the Midwest. All of them were excited about the future, confident of further growth in GDP and planning to invest significantly in the coming year. Many companies have used the recent tax-cuts to boost employees’ wages and dispense bonuses. That is probably part of the reason why American consumer and business confidence measures are flying.

But in many ways, the US is stuck in the past as much as it’s hurtling toward the future. The cradle of Silicon Valley and the world leader in technology is lightyears behind the rest of the world in many respects. The home of Visa and Mastercard continues to use signatures for most card transactions – you can forget about contactless payments. The stomping ground of global banking giants JPMorgan Chase, Citigroup and Goldman Sachs still clears most business transactions with cheques. There is plenty of productivity to be gained here.

Similarly, American infrastructure is creaking. Many of its airports, motorways and ports appear exactly as I remember them from visits back in the 1970s. The country is in dire need of public investment, but there seems to be precious little money left in the government’s coffers. How Donald Trump’s administration will deal with this problem will be extremely important for the country’s long-term prospects. Without 21st century facilities and technology, the country could fall into an inflationary trap that erodes its competitiveness, living standards and economic heft.

For now, however, America appears to be roaring down the blacktop with flaming tyre tracks in its wake.


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