Blue Whale chair Peter Hargreaves has given a downbeat forecast for the UK in a recent newsletter, choosing to bestow the honour of ‘land of opportunity for investors’ on the US.
Hargreaves (pictured right), who founded Hargreaves Lansdown in 1981, highlighted the UK’s “unprecedented” trade gap and soaring government debt. The government borrowing figures for December go some way to proving his point; with the Office for National Statistics (ONS) having reported £27.4bn of government borrowing for the month, £17bn high than in December 2021.
He added: “Our financial ills don’t stop there. We have had a fiscal deficit for over 20 years ergo the total debt is growing. Currency movements in the short term are impossible to forecast, they are caused by sentiment rather than fundamentals. Sterling has rallied since the Truss crash but in the medium term I am not optimistic in light of the above. Trade deals, of which we were optimistic, have faltered and the world is becoming more protectionist. We expect sterling to come under pressure.”
Neither was Hargreaves upbeat about the prospects for other economies, adding that the difficulties they face are often overlooked.
However, he argued that the US was a bright spot in an otherwise dreary global outlook. Despite its tardiness in combatting inflation and the prospect of a recession, Hargreaves remains confident: “Some economic growth is forecast albeit just 1%, but the US has a record of surprising on the upside. There appears to be no workforce shortage of the type bedevilling other economies. The US is also more insulated from energy shortages and protectionism. America remains the most entrepreneurial economy with a huge array of great businesses.”
Hargreaves said: “I believe most UK-based investors are still underweight in America. Currently there is much uncertainty, and it seems sensible to seek the large successful companies in the safest economy.”
According to Blue Whale’s December factsheet, two-thirds of the portfolio is invested in North America, and portfolio manager and CEO Steven Yiu (pictured left) has recently opened a stake in Canadian Natural Resources, an oil producer in the region.
The purchase gave Blue Whale’s energy sector exposure to the tune of 4.1% as of 31 December 2022, but technology holdings still dominate the portfolio, taking up over 45%.
In 2022, the fund underperformed its benchmark, the IA global average, by 16.5%, and was down 27.6% overall for the year.
