Fund Selector: Why is the US so different? – FT Adviser

What makes the US so confident? That was the question that I found myself pondering after a recent research trip across the pond.

Given that the trip took place in late January and early February, you would be forgiven for thinking that much of the rhetoric focused on US fiscal policy. This, however, was not the case.

The managers and experts that I met with were far more interested in the ‘real’ future of their country; placing a far greater weighting on issues such as immigration and gun control in the aftermath of Sandy Hook. As the US improves its productivity it is looking to immigration to help provide further inroads in boosting economic efficiency. Rather than it being a political thorn associated with negativity, they are actively focusing efforts on acquiring the necessary skillsets in order to improve future productivity.

It was not that they were casually ignoring the ‘sequestration’, or ‘difficult decisions on spending cuts’ in the straight-talking vernacular. They had simply priced it in to their thought process, knowing that half-baked solutions only ever surface when politicians are backed into a corner.

The concept of onshoring, such as repatriating manufacturing, has also made real and tangible headway, with shale gas being one of the more high-profile examples. With wages in China rising faster than inflation, the cheap labour that resulted

in huge competitiveness advantages and fuelled its economic re-emergence is rapidly disintegrating, paving the way for others to step into the void.

Indeed, the gap in labour competitiveness between China and Mexico has been waning in recent years and of course Mexico has the natural advantage of being next door to the world’s largest economy.

The combination of low real wages and reduced transportation costs makes Mexico a perfect trade partner for the US. It is such traits that make Mexico a favourite emerging market among many stock and bond pickers. In one meeting, Nancy Lazar of ISI International Strategy & Investment referred to one of her two favourite emerging markets as Mexico. She failed to conceal a wry smile as she revealed the second: the US Mid-Western states. The serious point being that she has great faith in the US recovery.

This is not to say that they are home and dry though. The road ahead remains tough, with sub-par economic growth, the $16trn (£10.6trn) Mount Everest-sized pile of debt and an addiction to monetary stimulus among the hurdles.

After completing 30 meetings covering five different cities, I was preparing myself to end the trip only to be caught in a perfect east coast winter storm, Nemo.

Travel disruptions were huge with 4,500 flights being cancelled and more than 650,000 people hit by power cuts. And yet New York, which was the recipient of a mere one foot of snow, was fully operational within 24 hours.