American equities have been booming in 2024, with the Dow Jones Industrial Average up nearly 16% over the past year and 50% over five-years. The NASDAQ has done even better, up 33% over one-year, and 107% over five-years. In fact, US equities have experienced a 15-year bull run, which according to some analysts is still gathering steam.
And despite the parlous state of the global economy, global inflation and global interest rates and social and political unrest in the US, the economy is still supposedly booming and the rally in US equities looks set to continue.
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America’s booming economy does seem to be something of an oxymoron, but the most simplistic explanation of US equities’ persistent strength is that America has the world’s biggest companies and these giants are the best at what they do in the world, and have the strongest earnings. Moreover, the American-based global titans are at the cutting edge in technology that is driving growth globally, whether that be Tesla NASDAQ:TSLA in electric vehicles, Microsoft NASDAQ:MSFT in IT and AI; Pfizer [NYSE:PFT] in pharmaceuticals; JP Morgan Chase NYSE:JPM in financial services, or Amazon NASDAQ:AMZN in retail and retail technology.
One investment trust that has been riding on the crest of the American equity wave is the GBP1.9bn JPMorgan American Investment Trust [LON:JAM] which has delivered jam yesterday, jam today and promises jam tomorrow.
Managed by J.P. Morgan Asset Management, the company was established in June 1881 and is overseen by Jonathan Simon who runs the fund from New York and has about 40 analysts on deck. The fund is in the Association of Investment Companies’ North America sector and is the second largest fund in the sector after the GBP12.5bn Pershing Square [LON:PSH] fund.
JPMorgan American aiming for capital growth
The fund’s aim is to achieve capital growth from North American investments by outperformance of the company’s benchmark, the S&P500 Index, with net dividends reinvested, expressed in sterling terms.
JPMorgan American focuses on capital growth over income, and has the mandate to invest in smaller companies, when necessary, although currently the fund is predominantly US large cap. The company can gear in the range of 5% net cash to 20% net cash and according to the AIC the current gearing ratio is 3%.
The fund has an ongoing charge of 0.38% and an annual management fee of 0.35% on assets below GBP500m, 0.3% on assets between GBP500m and GBP1bn, and 0.25% on assets above GBP1bn.
Simon is a JPMorgan lifer, having spent his whole career of 44-years with the bank and four-years as manager of the fund. Simon also manages the JPMorgan Mid Cap Value Fund, the JPMorgan Value Advantage Fund, and the JPMorgan Equity Focus Fund.
Joining Simon on the bridge is Felise Agranoff, another JPMorgan lifer, though by comparison she has only served 20-years at JPMorgan and one-year with the investment trust. Agranoff is also portfolio manager for the JPMorgan Growth Advantage, Mid Cap Growth and Mid Cap Equity Strategies.
All ships rise with the tide
The fund has been buoyed by the rising tide of US equities. In its sector, over one-year (on a NAV basis) to 6th May the fund is in third position returning +35.1% against an AIC North America sector average of +27.4%. However, it’s over the longer term that JPMorgan American pulls away. Over three-years the fund returned (on a NAV basis) +45.9% against a sector average of +32.5% and over 10-years has returned +373.8% against a sector average of +259.8% which sees JPMorgan American in top spot in the sector. The fund also managed to beat the Morningstar US Large Cap index, a composite index that tracks the performance of US large-cap stocks, consistently across all time periods.
The company at the end of March was underweight its benchmark (the S&P 500 Index) in technology, healthcare and industrials, and overweight in financials, real estate and energy and predominantly (60%) US large cap.
Top five holdings for JPMorgan American Investment Trust
| Investment | Weighting | Sector |
| Microsoft NASDAQ:MSFT | 7.2% | Information Technology |
| Amazon NASDAQ:AMZN | 5.4% | Consumer Discretionary |
| Nvidia NASDAQ:NVDA | 5.1% | Information Technology |
| Meta NASDAQ:META | 4.6% | Communications Services |
| EOG Resources NYSE:EOG | 2.9% | Energy |
Source: J.P. Morgan Asset Management as at 31st March 2024
The fund manager is confident that the US will continue its run, saying: “Our analysts’ estimates for S&P 500 Index earnings currently project +12% for 2024 and +12% for 2025,” and noted that as inflation eased and interest rates fell, the US economy (not as strong as the stock exchange) was showing signs of growth.
However, Simon noted that the spectres of instability stemming from the US presidential elections, and the potential for inflation to not fall as quickly as anticipated, leading to a longer period of higher interest rates, as potentially throwing a spanner in the works, and the threat of external, geopolitical shocks might push the US economy into recession in 2024.
It will all come crashing down eventually, but whether that is in ten months or ten years depends on which trader you talk to. How far and how fast, again is something that is a matter of debate by economists, but in the meantime jumping aboard the titan that is JPMorgan American will allow you to take advantage of the juice still in the tank of the US Equity engine.
