Thomson, who manages Rathbone Global Opportunities, had previously been bearish on equities, saying that he could not find enough genuine opportunities for his investors’ capital. Because of that, 20 per cent of his portfolio was in cash at the back end of last year. However, he says that has all changed.
"I’ve become progressively more bullish over the last year," Thomson said.
The manager has brought down his cash weighting to just under 3 per cent and the largest recipient of that capital has been US equities. Having held 35 per cent in the US six months ago, that figure is now 53 per cent.
"The US is recovering and that is reflected in it being the best-positioned economy in the world," he said.
"We are seeing a de-coupling, as it used to be that global economies were synchronised; however, the US is now certainly leading the pack. Because of that backdrop, I think US equities will continue to perform well."
There had been concerns that a slowdown in China could de-rail global equity markets' strong start to the year.
However, Thomson is not concerned about this development, as he feels it can only aid the performance of US stocks.
"There is a pretty standard school of thought that a slowing Chinese economy is bad news for the world economy – I have the complete opposite view," he said.
"I think it is very helpful for the rest of the world and it is a gift to the United States. A slowing China should lead to falling commodity prices and a stronger dollar, which pushes down inflation."
"There is a strong relationship between lower inflation and higher valuations – so equity valuations can continue to be pushed up."
US equities have performed well so far this year, the S&P 500 returning 27.28 per cent while the MSCI AC World index has returned 18.86 per cent.
Performance of indices year-to-date
Source: FE Analytics
A number of fund managers have stated that they now feel the US is fully valued given its progress. However, Thomson does not agree.
"Usually, increasing valuations are a precursor for earnings growth and earnings upgrades and I think we will see that in the second half of this year," he said.
"To be honest, valuation analysis is more of an art than a science. Quality doesn’t come cheap, but there is no reason to be concerned, because as the fundamentals are improving, then current valuations are fine."
"You get a comfort blanket by investing in the US, as it is innovative, well regulated and there is an element of predictability. You just don’t get that in the emerging markets. People say the emerging markets are cheap, but it is far more of a gamble," he added.
One of the major headwinds that could face investors this year is the Fed’s planned tapering of QE, whereby it reduces the huge amount of stimulus being poured into the economy.
Market bears have suggested that the asset programme has artificially supported the US recovery; however, Thomson says that investors should not be overly concerned.
"Bernanke is thinking about his legacy a bit here," he said.
"Ever since he started QE, he has been asked about the exit strategy. I think by talking about tapering, he is preparing the ground."
"The weaning-off process is indicative of a healing economy; data shows the housing market is improving, unemployment is coming down, though that will take a little longer to heal."
"I also think that tapering will be a bit slower and a bit later than people actually think. Overall, I think that investors shouldn’t try to be too clever. Don’t try and time when QE tapering will or won’t happen."
"The US economy is improving, wrap your arms around that," he added.
According to FE Analytics, Thomson’s £243m Rathbone Global Opportunities fund has been the third best-performing portfolio in the IMA Global sector over 10 years, with returns of 245.08 per cent, beating the FTSE World index by more than 100 percentage points.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Thomson’s fund was hit hard during the financial crash, losing nearly 40 per cent in 2008. That has marred its five-year numbers and so it sits in the third quartile over that time. However, it has bounced back and boasts top-quartile returns over three years.
He currently runs a concentrated portfolio of 52 holdings. The manager says he has bought new US stocks and added to existing ones.
His money has gone into the likes of consumer stocks, industrials, aerospace, infrastructure, and financials – although due to the scars of 2008, he is still avoiding banks.
Rathbone Global Opportunities has an ongoing charges figure (OCF) of 1.57 per cent and requires a minimum investment of £1,000.
