Europe and Japan the tonic for Bankers' US headache

The US has caused a headache for Bankers (BNKR ) since Donald Trump’s presidential victory last year. 

In half-year results for the £1.3bn trust, Janus Henderson’s Alex Crooke said the trust failed to make up losses suffered following the election thanks to an underweight position in US equities.

While he upped his allocation to the world’s largest economy following the election to 63%, it was not only still underweight versus the FTSE World index benchmark, but it was too little too late.

In the six month period to end of April, the net asset value (NAV) total return declined 4% versus a 2.6% fall in the benchmark, with most of the underperformance happening in November following the sharp rise in stocks after Trump’s win. The shares increased 0.1% over the period, leaving them trading at of 9.8%.

Admitting defeat in the US, Crooke then scaled back the allocation 60% and he has ‘used the US market as a source of cash to fund share buybacks’. The company repurchased 82m shares at an average discount of 10.2% of NAV in the period, at a cost of £97.1m.

Crooke is now focusing on his overweight positions in Europe and Japan where he feels ‘valuations are more appealing, combined with less exposure to the challenges of rising trade tariffs’.

The two regions were the best performers over the half-year, with Japanese holdings outperforming their benchmark 3%, thanks to financials and Sony ‘which put in a good performance, driven by high expectations on the gaming side of the business’.

Financials we the largest contributions more generally, as banks performed well. ‘Earnings are supported by interest rate hedging and expanding loan books, while cost pressure is easing through new digital offerings,’ Crooke said.

Technology also continued to boost the portfolio thanks to ongoing artificial intelligence (AI) optimism, although Crooke noted that ‘performance faded in the technology hardware sector on worries about tariffs’.

The main detractors were healthcare and retail, with valuations in the former falling around pricing concerns, tariffs and drug patent expiries. In the consumer sector, Crooke said ‘rising prices have caused shoppers to prioritise their spending and to favour better value offerings, hitting margins’.

Trump’s Liberation Day reciprocal tariffs may have whipsawed markets but Crooke was unconcerned about the market’s ability to absorb increased levies.

He said share prices have recovered most of their falls this year despite ‘any real certainty on trade negotiations between the US and trading partners’.

While Trump wants to bring manufacturing back to the US, Crooke said this is ‘likely to be impractical’ for areas such as textiles and will ‘depress margins in sectors like pharmaceuticals and technology’.

‘If tariffs end up in the 10% to 20% range, then the market is likely to move its focus to the more business friendly policies in the US, such as tax reforms and deregulation,’ he said.

‘Elsewhere in the world, economic growth is recovering from last year’s slowdown and interest rate cuts are supporting easier monetary conditions. Valuations are lower than the US and may improve as confidence in growth increases.’