Miton US fund positioned for ‘major’ rally

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The US market could surge as much as 10 per cent in the months following Tuesday’s election result regardless of a Democrat or Republican win, Miton fund managers Nick Ford and Hugh Grieves say.

In the last six months the US Opportunities fund has bought companies that will benefit from a stronger economic environment, including Ametek, JB Hunt, Pentair, Marriott International, Broadcom and Red Hat.

It has sold defensive healthcare and consumer staples stocks, including Philip Morris, PepsiCo, CocaCola, McDonalds, Becton Dickinson, Medtronic and Zimmer Biomet.

Their confidence contrasts with markets, which have faced a seven-session losing streak as Donald Trump catches up to Hillary Clinton in popular vote polls.

Ford and Grieves predict a Clinton win, but expect Republicans to retain the Senate and the House of Representatives, which they argue means Republican House Speaker Paul Ryan will block measures detrimental to business.

Clinton’s “fiscally responsible” policies would be reassuring for bond markets, they say.

“In the event of a Trump victory, we would have a probable scenario where the Republicans control Congress and the White House; hardly a terrible outcome for investors,” the pair say.

However, they say a Trump win would create question mark over bonds as he has not outlined how he would fund tax cuts.

They added that Congress was unlikely to sign off Trump’s “wilder” protectionist policies.

“We have positioned our fund for a cyclicals-led rally once the uncertainty relating to the elections is dispelled and investors switch to concentrating on the strength of the US economy and corporate earnings growth.”