Give those emerging markets a miss and back good ol’ US of A

Ruchir is head of global macro and emerging markets at Morgan Stanley in New York. In his search for where the smart money is heading next, he believes that it’s critical to avoid reading anything into the headlines, concentrate on independent research and then confirm what’s actually happening on the ground.

So while on holiday in Florida for the last three weeks that’s what I’ve been doing, too. Apart from speaking to business owners, I spent a day with four of the best independent economic analysts around, at Ned Davis Research. And the good news is that they all believe that the world is fixing its problems.

I’ve met pessimists and optimists, studied screeds of technical data, listened to talking heads on US telly and used my eyes on the ground, as Ruchir suggests. And while all this was going on, world stock markets have defied gravity.

January was the best US stock market performance since 1997, with the broad-based S&P 500 Index up over 5 per cent, despite Apple’s share price collapse. Incidentally, Apple made oodles of profit, has $137 billion (£88bn) in the bank, and if it were a country it would be the 45th biggest in the world, bigger than New Zealand.

So while some people insist that emerging markets is the place to be and headlines obsess about “The Great Rotation” – dumping bonds to buy equities – I think a decent rule of the road would be to back the US as a re-emerging market.

Here’s a question for you. Somewhere in the world there’s a place that boasts the biggest Walmart, biggest petrol station and biggest McDonald’s. Where do you reckon that is? New York? Mexico City? Beijing? Mumbai? All wrong. They’re in Willieston, population 100,000, in North Dakota’s Bakken Valley, where oil and gas discoveries are fast making the US into a world leader in energy production and exports.

Other game-changers favouring the US include positive demographics and technological advances that would blow you away. A record number of patents were registered last year, more than the rest of the world added together.

Take 3D printing (don’t worry, it boggles my mind too). A company in Minnesota uses 3D printing to build a car that travels 70 miles on a gallon of petrol at a top speed of 70mph, built to last 35 years.

How about battery-powered cars ? If you’re like me you will associate electric cars with something not dissimilar to the one Fred Flintstone drove. Think again. Outside a restaurant one night in Florida sat a California-made Tesla Sports coupe. It was battery-powered, has zero emissions, travels 300 miles on one battery charge, has a top speed of 125mph and accelerates faster than a Porsche Turbo.

Energy experts say battery technology is advancing so rapidly that it won’t be long before you can recharge the battery as quickly as you currently buy 300 miles topping up your petrol tank .The future it seems, is electric, not orange.

As to the debate about bonds being dumped to flood into equities… hmm. But I can tell you of a Ned Davis chart that compares the value for money between long-term interest rates and shares, which shows a striking resemblance between now and 1941/2, when, after a similarly deep financial crisis, equities significantly outperformed bonds for the next 20 to 30 years. But it did not happen overnight.

But you know something? I bet that five years from now you’ll be glad you stuck by your equities, and that the US holdings will have made the difference

• Alan Steel is chairman of Alan Steel Asset Management