Having quarrelled childishly over the US debt ceiling over the last few months, they have finally gone over the edge and forced certain parts of the US public service to shutdown, as the money isn't there to pay all the bills. For those of you worried that planes will be falling from the skies and murderers will be skipping merrily from jail, this is not the case. Instead, amongst other things, certain veterans/pensioners will not get their entitlement cheques, lights will be turned off at landmarks, gates slammed shut at National Parks and, the lord be praised, Capitol Hill's Twitter feed will shut down.
Personally, I would vote for a total shutdown of the US government, as the ensuing anarchy would at least be less predictable than the perennially painful outcomes from the posturing politicians. From an immediate point of view we are relatively unconcerned about the outcomes of this latest nonsense, as we expect a patchwork resolution to be thrown over this fine mess and we will move on to the next battle, over the details of the debt ceiling and the (yet to be passed) budget. Then we will have the US mid-term elections to look forward to.
There will be some conciliation over the debt ceiling, although it might be a while before we get there. President Obama has been missing from negotiations and needs to step in to the breach, not least as his second term is following the same misguided path as his first.
A similar event, admittedly in a less poisonous political backdrop, lasted three weeks in the mid-90s. Such a delay is unlikely here, although the Republican elephant would like to trample over Obamacare thoroughly to make himself heard.
So, assuming there is a resolution, where does it leave the US economy? If one can ignore the toxic fumes that linger in Washington, the US economy is doing fine. Reading comments from our celebrated friends at Findlay Park yesterday, their evaluation from recent trips to the US and meetings with companies were that the economy was starting to reflect the positive environment that the equity market had already suggested.
Performance of indices over 3yrs
Source: FE Analytics
The banking sector has recuperated and the housing market recovery is broadening out. Missing parts of the equation, such as small business confidence and capital expenditure were slowly coming back.
Generally things are getting better, as we have suggested in our own missives in the last few months. The politicians should recognise that they are in danger of breaking this brittle recovery and delaying a return to trend growth again. Top of the list of companies' concerns is Obamacare and taxation; boy do we love politicians.
In turn, in an environment where the economy is healing, where global growth is more balanced, where companies are very strong and interest rates very low, it will come as no surprise that the pesky politicians remain perched at the top of our list of concerns. The events of the last few weeks, both in the US and Europe, strongly suggest that this worry will be here for some time to come.
As well as being chief investment officer at Psigma, Tom Becket runs the Psigma Dynamic Multi Asset fund.
Performance of fund vs sector since launch
Source: FE Analytics
According to FE data, the fund has returned just over 42 per cent since its launch in September 2008, putting it slightly ahead of its IMA Mixed Investment 40%-85% Shares sector average, with less volatility.
Psigma Dynamic Multi Asset requires a minimum investment of £10,000 and has ongoing charges of 2.45 per cent.
