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September 20, 2016updated 27 Sep 2016 10:14am

Why I’d put my money on the US economy

By Spear's

While the UK combats low interest rates and China still struggles after its recent downturn, the US continues its economic journey uphill, writes Simon Calton.

While the UK battened down the hatches and reduced its interest rates by a quarter per cent this month, the European economy continues to struggle. Meanwhile, China has its own declining economy to contend with, and the US is discussing an increase in the Federal Interest rates due to numerous positive economic factors including increases in property values, increased spending, reduced unemployment figures, and continued job growth.

The increased confidence model that US policies have driven has been self-perpetuating in such a positive way. Although the existing confidence issue and no doubt upcoming economic problems in the UK will have some negative impact on the US, this month the one-month Libor (a measurement of the cost for banks to lend money globally) rose to 0.52217 per cent, its highest since March 2009, while the six-month Libor climbed to 1.229 per cent, its highest since June 2009.  The three month Libor, which is the main benchmark for the majority of financial transactions worldwide, was fixed at 0.82544 per cent for three days straight, also a high. The US has the benefit of perceived stability for foreign and domestic investment and that strength will outshine the Brexit wave.

You also have to factor oil prices into the equation, which saw a slight decline at the end of 2015 but have now been at an all-time low for so long that they are no longer a big story. This is actually good news, because if they steady at $40-55 per barrel for long enough, it will become the norm and stability will ensue.

The US has also weathered China’s downturn bubbling away pretty well. Even with such a close trade partner, the US is finding ways to combat the impact of this on its own economy. I believe this factor is all due to how it dealt with the economic crisis of 2008 and this has held the country in good stead for these other external factors. If you are an avid reader of my blogs you will remember the piece I wrote on how the US had handled their economic policies after this crisis and the difference between that and the harsh austerity measures used by many other countries including the UK.

And now we see the latest labour statistics for the US smashing my point home. Confidence means more money and innovation, which results in more staff requirements and a healthier economy. An addition of 459,000 jobs to the US economy in the months of June and July of this year shows real signs that the economy is healthier.

Arizona looks to top the list for job growth over the next three years with Nevada and Florida following close behind. This may be due to the hit that these three states took in the last eight years after the banking crisis of 2008, leaving them plenty of room to rebound. I believe in stability of a state over rapid growth due to such external economic factors having such an impact on your investment for which you are helpless to do anything about after the event. I believe it’s best to diversify your portfolio over different areas and look for states and cities that have the best resilience against adverse market conditions; states like Minnesota and New York come to mind for optimal investment opportunity.

Of course, as a director of an alternative US property investment fund I am biased toward such offerings. But you have to ask yourself why, after all the due diligence I conducted over the many years in this industry, did I pick the US real estate marketplace to spend my clients’ and my own money?

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The reason for this comes from clear facts and figures after the financial crisis. The individual nature of the different states within the US gives you an opportunity to diversify your portfolio and protect your investment. Around every corner there is an outside influence ready to take your investment dollars from under you; because of this you must conduct your own due diligence and be prepared to battle unforeseen influences beyond your control.

There isn’t a country in the world that has as much data published as the US on both a macro and micro economic basis. This allows you to make more informed decisions, which should give you confidence in your investments.

Simon Calton is founder and CEO of Carlton James, a US and BVI based private lending group

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