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How much should you allocate to US equities?

The United States accounts for around half of the global equities index so whether you like the asset class or not you can never ignore it, or eliminate it from a portfolio.


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At the moment however it is becoming particularly difficult to read what is going on in the world’s largest economy or how healthy its many companies are overall. If you cannot get a good read on these things, it is very hard to decide on a US equities weighting.

On one hand you can readily construct an argument to suggest a moderate overweight is the best bet, but there is plenty to steer you towards trimming down a US equities allocation to a significant underweight.

Take the latest employment data coming to us from across the Atlantic for example. The Labor Department’s non-farm payroll number is swinging wildly. In January it undershot expectations with 151,000 jobs added during the month versus the 190,000 expected by analysts, but just one month before some 292,000 jobs were added, trouncing estimates of 200,000.  

Manufacturing data also almost seems as if it is being designed to wrong-foot investors, with read-outs from slightly different indexes saying different things about the economy.

AJ Bell’s investment director Russ Mould rightly noted that the Philadelphia Federal Reserve’s manufacturing business outlook survey raised fresh questions about the underlying health of the overall US economy. However it came straight after mixed readings from the equivalent Empire State data on Tuesday and the surprisingly strong US industrial production figures released on Wednesday.

All that is before you look at the overall performance of the equities themselves. As you can see below, they are all over the place recently.