In many ways, the world’s largest economy is further along the road to recovery than many other markets, both emerging and developed. However, it is still strapped with a heavy debt burden and GDP growth is only hovering around 2.2 per cent – hardly racing ahead.
The biggest question looming on the horizon is what the Federal Reserve will do with the unprecedented policy of quantitative easing it has had in place since November 2008.
Since the first round of QE, the Fed has carried out two further rounds of bond-buying because it did not think the economy was growing robustly enough to sustain itself.
However, since the market has surged ahead this year, picking up 22.72 per cent year-to-date, and the wider economy has begun to show signs of life, especially in the housing sector, it is expected to pare back its money printing sooner than was previously expected.
Performance of index in 2013
Source: FE Analytics
In tomorrow’s regular policy meeting, Fed chairman Ben Bernanke is expected to announce the tapering of QE, which means the central bank will buy a smaller number of US Treasuries than it has done previously.
Bernanke is expected to cut its $85bn monthly purchase of assets by as much as $15bn.
What this means for the global economy, and for individual investors, remains to be seen, but the market has generally reacted negatively to the news of tapering.
However, Fidelity’s Trevor Greetham (pictured) thinks the move is a natural step on the road to recovery and adds worried investors should look to equities as QE ends, which will protect them better than bonds will. "With the US economy recovering steadily, banks lending and home prices rising, it makes sense that the Fed reduces its money printing and moves towards eventual interest rate rises," he said.
"Quantitative easing is a crisis-fighting tool useful when interest rates are already close to their zero lower boundary. Indeed, outside of Japan and Switzerland, the rest of the world has already stopped printing money, abruptly, with no fanfare and no obvious damage to the economy or financial markets."
"We expect stocks to come through the process of US monetary normalisation in much better shape than bonds. Stocks never factored in the artificially low level central banks drove bond yields to and valuations are reasonable."
Greetham, director of asset allocation at Fidelity Worldwide Investment, adds that a broadening pick-up in global growth should continue to boost corporate earnings.
He says there are two possible outcomes relating to the movements of the US dollar that will determine where investors should position themselves.
"The reaction of the US dollar to the tapering process will determine the optimal portfolio strategy," Greetham said.
"If the approach of higher US rates leads to a period of renewed dollar strength, as we expect, then stocks in the US and Japan stand to benefit as lower inflation keeps monetary policy loose in America while yen weakness boosts profit margins for Japanese exporters."
"A more gradual-than-expected tapering process could see the dollar weaken to the benefit of commodities and the emerging markets, areas that have suffered most from a repatriation of US capital in recent months."
North America is currently the highest regional weighting in each of Gretham’s multi-asset funds – Fidelity Multi Asset Defensive, Strategic and Growth.
The Growth fund has the highest allocation to the region, at nearly 40 per cent of the portfolio.
Sitting within the IMA Mixed Investment 40%-80% Shares sector, the £551m fund has lagged its sector and benchmark – a combination of the MSCI World index, FTSE All Share, Libid Sterling 1 week index, DJ UBS Commodity index, BofA Merrill Lynch Sterling Large Cap index and the FTSE EPRA/NAREIT Developed index – over one and three years.
However, the fund has delivered consistently positive returns over each period and has outshone its peers in recent weeks.
Over three years, the fund has made 16.73 per cent while the sector has gained 24 per cent, according to FE Analytics.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
The fund has offered investors access to growth with less volatility than its peers. Over the last three years, the fund has an annualised volatility score of 8.89 per cent, nearly one percentage point lower than the sector.
All three multi-asset funds require a minimum investment of £1,000. The Defensive portfolio has ongoing charges of 1.58 per cent, while the Strategic fund charges 1.59 per cent. The Growth portfolio has ongoing charges of 1.74 per cent.