Where would you invest USD 1 Million today?

October 2018 

The US remains by far the fastest growing developed world economy (growth circa GDP 3% plus per annum) and the US Dollar is showing signs of strength after a weak 2017 as US interest rates remain on a firm but gradual upward path – the key ‘Fed Funds’ interest rate (the rate that banks lend to each other on reserves deposited at the Federal Reserve/US Central Bank) has just been raised by a quarter of a point to a range of 2 per cent to 2.25 per cent, the third such increase this year.

With such an economic and strengthening currency backdrop, I would put 75% in USD Assets. I would favour equities despite being near all-time highs given bonds look to underperform as interest rates rise further. Equities will do OK as long as the interest rate increases remain gradual and don’t rise to 4% plus in 18/24 months.

A major driver of US stock market performance has been technology stocks especially the FAANG stocks – Facebook, Apple, Amazon, Netflix, Google. Given such companies are literally ‘game changers’ I would invest half of my 75% in such stocks i.e. 32.5%.

To provide some diversification, I would invest the remaining 32.5% in stocks/sectors that continue to benefit from Trump’s pro business policies i.e.

  • Banks e.g. Bank of America Merrill Lynch – benefitting from banking de-regulation
  • Construction (or similar) companies e.g. Caterpillar Tractor benefitting from the increase in infrastructure spending.

Of the remaining 25%, I would put 20% into Emerging Markets including Argentina where the central bank is responding well to current problems via raising interest rates and agreeing a loan deal with the IMF (International Monetary Fund). Emerging Markets have fallen 20% this year and this represents a buying opportunity due to the healthy long term outlook of these economies.

The final 5% I would put into Gold. Gold has performed poorly as equities particularly have performed well over the last several years. Gold is at $1,200 per ounce down from its high of $1,900.Gold will perform well if inflation returns (as it is seen as a store of real value). After several years of global quantitative easing this is quite possible.

About Paul McCormick

Paul McCormick is the founder of Opening City Doors and is a Financial Market Specialist having worked for several leading Investment Banks and financial technology institutions additionally.He therefore provides a unique insight, and unusually broad perspective, into the opportunities available in London Financial Markets and related sectors and how to launch your career in the ‘City’.