How to pick winners in the US

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

The week ahead is a busy one for US markets. Not least because of the G20 meeting coming up at the end of the week and that meeting between President Donald Trump and his Chinese counterpart, President Xi Jinping.

While technically a side-show at the leaders’ conference in Buenos Aires, the discussions between the two men, set for 30 November 30 and 1 December, are bound to get global attention.

While the data has yet to show the full effect of Trump’s tariffs so far on China, indicators suggest the impact is being felt; although not alarmingly so. As yet. But, as the OECD pointed out, only last week, if there is an escalation and Trump goes ahead with his threat to impose 25% tariffs on imports from China across the board, the impact is likely to be much more dramatic.

But of course, while trade tensions are a key topic for US-watchers at the moment, there’s plenty more on the US agenda to keep market-watchers’ attention.

Like that technical correction in the S&P 500, for instance. Apple, which has led the charge in the tech sector that has in turn been the driver of the bull market in the US for so long now, lost more than 20% of its value. And Apple wasn’t the only one of the FAANGs to turn sour for investors. Last week every single one of them - Facebook, Apple, Amazon, Netflix and Google - fell at least 20% from their peak.

A buying opportunity? Possibly. But more importantly, a reminder of the fact that stock picking is key.

Having been on this bull run for so long, fears are mounting that a correction has to come at some point. And October and now November will possibly go down as the most stressful months many US fund managers and stock pickers have experienced for some time.

However, as the raft of economic and other data that is due out from the States in the next week is likely to show us, these blips are probably just that. And not the start of a bear market.

Fears of a recession look overdone. A second reading of GDP is expected to show the US economy actually grew at an annualised rate of 3.6% in the third quarter, compared with a preliminary reading of 3.5%. We’re also due to get the latest personal consumption expenditure, which is the Fed’s preferred inflation gauge, as well as the latest US house sales data.

Markets go through periods of volatility. Stocks rise and fall. It’s all part of the investment cycle. And it’s where experienced stock pickers come into their own. Fund managers who follow the markets day in and day out, can spot signs of weakness and identify opportunities.

Investing across a diverse range of assets and geographies is one way to make your money grow. Funds like those in our Select 50 have all been chosen because they offer the best of breed within their class. So, if you’re concerned about the sell-off in FAANGs but still want to invest in US tech then there are options available to you. The Fidelity American Special Situations Fund invests in what you might call more ‘traditional’ tech. It aims to achieve long-term capital growth from a mix of typically medium-sized and smaller companies. But it’s not restricted in its choice of company by either size or industry, so fund manager Angel Agudo is free to invest in companies that he sees offering the best long-term returns - no matter what the outcome of the two Presidents’ meeting this week.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.