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Road Trip across the US: A great nation, recovering but divided

CIO Tom Becket went Stateside for this latest research trip. For the first part of the trip, Tom travelled to New York, Boston and Greenwich and met with fund managers and investment strategists. For the second part of his trip, Tom decided to do something a little different, when he flew to Cleveland and drove through Ohio and Indiana to Chicago, in order to find out more about what is actually going on in the US economy.

There are four short video blogs from his road trip – watch them here.

Video Blog Transcripts

Cleveland, Ohio

Well greetings and welcome from downtown Cleveland on a Saturday morning towards the end of September. It’s a beautiful sunny day here, at least it’s shaping up to be and we managed to avoid the worst ravages of the tragic hurricane currently going through the south of the States. Today I’m doing something a little bit different on my research trip. The first few days I was here last week I was in New York, Boston and Greenwich Connecticut, seeing fund managers and investment strategists that we know and respect, trying to get a handle on market valuations and what’s next for the US economy and yesterday afternoon I flew to Cleveland, in the great state of Ohio, where last night I took in a Cleveland Indians baseball game which they lost but they seem well set on their way to the post-season playoffs  and today I’m going to pick up a car and drive through Ohio and Indiana on the way to Chicago tomorrow evening and trying to ascertain a bit more about what’s going on in the economy and in particular in these important swing states what’s going on in the US political backdrop. So the next couple of days I’ll take a few videos from various places along my route just trying to answer those important questions are we head towards the end of 2018 and into 2019.

First Stop – South Bend, Indiana

The first place on my travels where I stopped was South Bend, Indiana, where like everyone else, I was here to watch Notre Dame play football. This time against the Vanderbilt Commodores, which despite a bit of a scare in the 4th quarter, the Fighting Irish ultimately came out to claim a victory. As you can imagine, there was quite a lot of celebration in the town last night. There is quite a lot of celebration taking place across all of the US at this point in time and it’s quite obvious as you travel around the country that confidence is high and that people are enjoying life at this point in time. I think the confidence comes particularly from the consumer side, where you are seeing people happy because they are getting more money in their pockets from their tax cuts but also they’re confident and able to leave their jobs and get other ones and that’s leading to some pay rises for the first time really in the last 10 years. Another reason why people are confident is because obviously the prices of assets have all gone up in their 401(k) or their pension portfolios and again this has given people confidence. So at this point in time, as we go around the US its quite obvious that the economy seems on a pretty sound footing, that people are confident and that should lead to decent consumption growth as we move forward through the next year or so.

Next Stop – Gary, Indiana

The next place I stopped on my trip was Gary, Indiana. Now Gary is famous for two things; first being the birth place of the guys pictured there behind me, obviously the Jackson Five and secondly for steel. In fact, Gary itself is named after the first Chairman of the United States Steel Corporation and steel is very important to Gary, Indiana. Now obviously that’s been one of the contributing factors behind the fall of Gary over the last few decades. As you drive around the town, you see it’s a city left behind and certainly is a clear indication of how the American economy of the last decade or so in particular has become increasingly divided between those who are doing well and those that are doing badly. Now in the more recent times actually Gary Indiana has benefitted from the resurgence of steel production in the US brought around by the tariffs imposed upon foreign steel by Mr Trump.

Now this could continue, and you could see a mini revival in Gary but clearly, as I said, this is an indicator between those parts of the US which are doing well and sadly those parts of the US, like Gary, which have really done quite badly. As I drive around America and I speak to people here it’s clear that the US is quite a divided place as I go onto talk about in the political side in a minute. While the economy is strong, as I mentioned in the first part of the video, clearly there are parts where still the economy has much further to go in the form of a recovery and hopefully improving in the decades ahead.

Last stop – Chicago

The last place I stopped on my trip was Chicago and here like many other Chicago people, I’m out for an early morning run along the shores of Lake Michigan, which is quite beautiful. But Chicago was a fitting place to end my travels across the States because it really encapsulates a lot of the things which causes me concern about a divided nation in the States, certainly from the political side of things, America seems incredibly divided and the chasm between both sides of the political debate rarely seem wider and seem to have widened significantly since my last trip less than a year ago. Other things one notices in Chicago is the very deep gap between the rich and the poor and certainly with the power of Chicago’s financial district and the weakness of many of the poorer areas of the town, it creates an incredible contrast. Another thing one notices going around the States is the problem that the country has with obesity. Certainly, if I look year-over-year, people do seem to be getting larger and that still strikes me as being a big problem stored up for the health system over the next few decades. So clearly, there are lots of positives about the US and as I have said, the economy seems to be doing quite well from a cyclical perspective but there remains deep problems and certainly the political debate seems set to get more toxic as we head into the US mid-terms  later on this year, which could well cause some volatility for markets. But as I travel across the US I find it a regenerating and rejuvenating experience but also open one’s eyes to the long term opportunities and the long term problems that the US economy and the great US country itself have over the medium to long term. So that’s quite enough from me today. I look forward to coming back with some views on markets and another video blog later on this week. Thank you for watching, I look forward to speaking with you again soon.

 

Tom Becket,

Chief Investment Manager

Psigma Investment Management

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