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Dollar earners a hedge against weak sterling

Phil continues to prefer US shares, or UK shares with foreign earnings, as he fears the value of the pound still has a long way to fall.
Dollar earners a hedge against weak sterling

We are halfway through 2020 and it has been a horrible year so far for investors in UK shares. The FTSE All Share Index has fallen by just over 18 per cent in total return terms as we face up to what is arguably the worst set of economic conditions in living memory.

This does not seem to have bothered investors in US tech shares. The S&P 500 fell by 4 per cent in the first half of the year but the technology heavy Nasdaq was up by 12 per cent. UK investors in US markets have received a boost from a 6.5 per cent devaluation in the pound against the US dollar.

In recent weeks, I have continued to express my preference for US shares or UK shares with lots of foreign earnings as I believe that the UK economy is in such a bad state that I fear that the value of the pound still has a long way to fall against the US dollar.

Yet again, investing in overseas and US shares is paying off for UK investors. This is simply down to the fact that there are better businesses, with better growth prospects to choose from. I see no reason to change this view.

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