A major shift is taking place in Wall Street. Traders, who were fixated on US stocks, are now looking for investing opportunities in Anywhere But America.
The movement even has its own acronym, Abusa – Anywhere But USA.
UK and European shares have become more popular amid a backlash against Donald Trump’s tariff policies and anxiety over the size of the US national debt and trade deficit.
British businesses including Alphawave, Oxford Ionics and Spectris have attracted takeover offers from US buyers this week.
This signals to British investors that there are opportunities to cash in. US predators can spot bargain UK companies, so shareholders here could make themselves a profit by doing the same.
The UK market is rising: the FTSE 100 blue-chip index soared to a level close to its March record high of 8,871.
Ken Wotton, manager of the Strategic Equity Capital trust which backs smaller UK companies, says: ‘Overseas buyers are capitalising, while domestic investors overlook the value on our doorstep.’
Despite the rise in Abusa trades, some Wall Street investors remain steadfastly faithful to US shares.
The FTSE 100 blue-chip index soared to a level close to its March record high of 8,871
They seem to believe that if shares fall following a move by the President, they will bounce up on the Taco principle – it stands for Trump Always Chickens Out.
Indeed, he has staged several rapid retreats.
However, these dizzying turnarounds are making many investors increasingly nervous and boosting the allure of Anywhere But America.
Neil Wilson, strategist at Saxo Bank, calls it ‘a once-in-a-generation realignment of the way the global economy runs’, with capital shifting out of the US and into other markets.
The Magnificent Seven tech stocks – Amazon, Alphabet, Apple, Meta, Microsoft, Nvidia and Tesla – have provided half of the gains in the MSCI World index over the past two years.
But, as Darius McDermott of FundCalibre points out, the Anywhere But America mood could lead to a rush to exit.
‘The unpredictability coming out of Washington is forcing more pension funds to question how much US exposure they really need,’ he says.
‘That has the potential to spark a significant shift in global capital flows. Even a modest reallocation into UK and European shares could have an outsized impact, particularly in areas like small and medium-sized companies.’
Fabiana Fedeli, of asset management firm M&G, urges investors to be aware of the impact of the Anywhere But America phenomenon.
‘Empires fall, but they don’t fall in one day. US exceptionalism is alive in the form of strong intellectual capital, deep capital markets, and a culture that fosters entrepreneurship. But this doesn’t mean that the US market is the only game in town.’
Investors may not wish to shun America totally – it is still a formidable market with impressive companies. But spreading investments across different markets, rather than having too many eggs in one basket, is usually a good idea.
Here’s what to do if you want to seek out profits away from the US.
THE UK
A fund or investment trust is the simplest way to start backing Britain.
Recommendations on the Interactive Investor platform include the low-cost Fidelity Index fund, JPM UK Equity Core fund, and City of London Investment Trust if you are looking for an income.
For a more adventurous selection try Fidelity Special Values, which holds a mix of FTSE 100 and FTSE 250 stocks, with names such as Direct Line and NatWest alongside lesser-known stocks such as engineering group Keller, which builds foundations for bridges, high-rises and tunnels.
For exposure to the more domestically focused FTSE 250, check out exchange-traded funds (ETFs) such as the iShares FTSE 250 and the Vanguard FTSE 250 – my flutter on this index.
If you would like to put a small amount into a range of UK funds each month, McDermott’s top tips are Jupiter UK Dynamic Equity, AXA Framlington UK Mid Cap and IFSL Marlborough Special Situations.
Ken Wotton, manager of the Strategic Equity Capital trust which backs smaller UK firms
This fund’s largest holding is fintech business Alpha Group International. In May Alpha rejected an approach from an American predator, Corpay. But the two parties are still talking. Corpay is compelled to make a firm offer by July 7, which will doubtless reflect the 33pc increase in Alpha’s shares since January.
If the American pursuit of Alpha and other previously unloved UK companies has tempted you to mount a search of your own, Will James, fund manager of the Guinness European Equity Income Fund, argues that you can find ‘high-quality companies that have been hiding in plain sight. ‘
He cites Admiral, the £10billion insurance company. Milena Mondini de Focatiis, Admiral’s chief executive, recently cut car cover prices and so attracted many more policyholders.
James comments: ‘Admiral is a customer-focused digital disruptor, with a cost-efficient capital-light structure – and a great culture. It also has a very attractive dividend payout policy.’
He points out that the share price looks good value in relation to the company’s profits.
Shares in Admiral, a member of the FTSE 100, have risen by 24pc since the start of the year to 3,272p. One analyst has set a target price of 3,800p.
Shares in the £2.74billion construction company Balfour Beatty also look good value in relation to its earnings.
Alec Cutler, manager of the Orbis Global Balanced Fund, contends that Balfour Beatty would be far more highly valued in the US on the basis of its substantial cash pile and its key role in the HS2 rail link and other transformative projects.
Analysts consider the shares to be a ‘buy’, with one targeting an increase from the current 497p to 590p.
It could also pay to explore opportunities in the residential construction sector, following this week’s spending review announcement of a £39billion affordable homes programme.
An array of obstacles lies in the path of the building of new housing.
However, the long-term beneficiaries include Barratt, Berkeley, Bellway, Persimmon, Taylor Wimpey and the brick and materials supplier such as Breedon, Forterra, Marshalls and Michelmersh.
EUROPE
The FTSE 100 is up by 7pc since the start of the year. The German Dax index, however, has leapt by 19pc.
It is being propelled by forecasts that profits at its 40 automobile, defence, infrastructure and other constituents are set to outpace those of their US peers, thanks to government stimulus.
US investors who used to think that Europe was a backwater held back by a dense thicket of regulations are seeing the region with new eyes.
The Dax’s stars include Rheinmetall, maker of weapons and ammunition, whose shares have jumped by 176pc to €1,720 since January. Analysts still rate the defence contractor a ‘buy’, with an average target price of €1,933.
Over the same period, shares in Siemens Energy have soared by 68pc to €85. As Cutler points out, the unglamorous corporation makes the gas turbines that power the vast data centres on which the artificial intelligence (AI) industrial revolution relies.
Doubtless enthused by this trend, the analysts at Deutsche Bank have set a target price of €95.
European shares can be tricky to research, which means that a fund can be a simpler option. McDermott likes BlackRock European Dynamic, with its emphasis on undervalued companies.
In March I suggested that a diversification into Europe via such funds and trusts as Fidelity European Trust could be a safe haven in the new Trump world order.
I followed my own advice and took a stake in this trust, which invests in multinationals such as Nestle and the software group Sap.
I am not breaking up with America. But I am enjoying new relationships elsewhere.
