Major state pension update as tariffs threaten hike in retirement age | Personal Finance | Finance
The US economy has been propped up by successive governments and is now so in debt that US President Donald Trump’s tariffs are putting global savers cash at risk, one of the world’s largest asset managers has warned. UK pension funds invest heavily in US companies and the US stockmarket, by value, holds 60 per cent of the world’s investments.
Karen Ward, managing director and EMEA chief market strategist at J.P. Morgan Asset Management said this overeliance on the US was worrying and pension savers’ cash needed to be moved away from the US.
She said US companies had been doing well but that pension savers were facing a demographic timebomb and their retirement funds needed to be protected.
Ward told the Pensions and Lifetime Savings Association annual investment conference the UK and the EU were in a much better place economically than the US which had “blown it”.
She said “Our savings rate picked up in the pandemic and they are still pretty high.” Ward said lots of cheques had been handed out to US companies which had propped up the US economy
Ward said: “They’ve used up all of their pandemic related savings. We haven’t. We’ve got that whole pot of money still there. We’ve paid off a bit of our debt.”
Ward said that for a decade the seven largest US tech companies had done very well for investors.
She told an audience of pension companies, who invest the savings and pensions of millions of Britions that they needed to reign in their US investments
“Think about how the rest of the world is starting to move in reaction to Trump.
“Don’t use US exceptionalism as your blueprint for what happens next.”
She told delegates that some portfolios may be exposed to large amounts of risk without realising. She used the example of Tesla’s falling share price.
“Do you [asset managers] know that you hold more in Tesla, which has 150 times price to earnings ratio than you own of the whole European financial sector [so EU-based companies] which pays you a dividend yield of 5%.”
She sadded: “This makes me very nervous.”
Trump also warned that investing in US debt might also be more risky. The US economy raises money by issuing US Treasuries but the US is also one of the most indebted nations in the world.
“Bonds are not the safe stuff that we used to think they are.”
Ward warned that governments are going to have to be constantly choosing between pleasing their electorate and pleasing the bond market. “And if you’re having to therefore take out of that safe asset and give back to your client in a year in which the government has got that balance wrong and it has upset the bond market to try and please the electorate, then that’s a real problem. “
“So we can rely on bonds. I’m not saying don’t use bonds but I don’t think they’re the all weather safe asset that they used to be.”
Ward was asked what she felt might be the major risk to US markets this year.
She said her greatest fear was that a tech company may lose its value and then brings down the value of all the big tech companies.
“It’s actually not Trump [she was most afraid of].
“Now it would be how tech performs this year. Because tech is, as I said, I know how many people are passively invested, and I know how important these tech companies are in people’s wealth, and there is the risk of contagion to the other tech companies as well.”
