Where would you invest USD 1 Million today?

Update March 2017

With Donald Trump winning the US election the prospects look bright for US economic growth which he states he wishes to “double”. Stronger economic growth suggest higher interest rates in the US ( the ‘Fed Funds’ rate was raised this month by 0.25% to 1%). Both should propel the US Dollar higher so I would invest the majority of my investment in US Dollar denominated assets. 

Within my USD investment portfolio, I would invest the majority of my funds in US equities with the prospects for economic growth being strong.(Bonds are unlikely to do well in a rising interest rate environment but see exception below).The US equity markets are at record levels having risen broadly 10% since the US election. Despite this I would allocate my 100% USD portfolio as follows:

25% US Equities – Pharmatceutical shares e.g. GSK as Trump has indicated he is going to drop the investigation into large drug company price fixing.

25% US Equities – Defense stocks (Army/Navy/Airforce suppliers) e.g.Lockheed Martin as Trump is preaching an aggressive US foreign policy and has promised to boost defense spending.

25% US Equities – Infrastructure stocks e.g.Caterpillar Tractors as Trump has promised massive spending in this area.

25% US Corporate Bonds. Although I generally favour equities over bonds, yields have risen substantially and

  • provide a balance to my equity portfolio
  • offer good value at these levels.(The US 10-year Government Bond yield has risen from 1.32% yield-to-maturity last summer to 2.20% today.This yields discounts an awful lot of Trump inspired economic growth which is yet to happen).

I would buy Corporate Bonds rather than Government Bonds as Corporate Bonds offer higher yields (how much depends on the credit and the maturity of the bond) and corporate credit default risk is relatively low in a vibrant US economy.

An alternative US equity sector to invest in is US banks as Trump has said he wants to liberalise this sector which means banks should make greater profits. But banks shares have risen very strongly since the election e.g. Goldman Sachs is up 30% so maybe not much value left in this sector. 

 

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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’.