Personal finance: Clinton pulls it off

Just in case you thought to escape any mention of President Bill Clinton in the financial pages, I must disappoint you. The shenanigans at the White House might be the focus of attention elsewhere, but the City was taking note this week of that other important happening with which the US president was involved - the State of the Union message.

Actually, the State of the Union looks pretty good. The President was upbeat in his delivery. True, he did remark that the US would not be insulated from problems in the Far East entirely, but he even managed to sound positive about the situation there. The intention to co-operate on an international basis to ensure the situation does not get out of hand was, perhaps, the least he could promise, but it sounded good. At the first sign of trade barriers going up to head off cheap Far Eastern imports, I shall be diving for the door.

America really has been an economic success story under his Presidency. Here in the UK, most fund managers called the end of the bull market on Wall Street before Clinton had been elected for his second term. Yet a strong currency and rising share values have meant the US market was the one place in which you should not have been under-weight. The big question is whether the bull run can continue.

Corporate activity may help in the near term. Compaq's acquisition of Digital could be the forerunner of more bids - and not just in the computer industry. Banks are undergoing something of a shake-out over there. Moreover, information technology is delivering vast changes to working practices - as in so many industries within the US - which is why Compaq felt compelled to act.

If bids and buy-backs are limiting supply for the purchasers of US equities, and thus keeping prices higher, there are still some concerns. One worry has been that inflation will re-emerge. Yet, if the Asian crisis is likely to have one effect it is the postponement of any uptick in retail prices. With relatively full employment, the expectation was that wage costs would start to escalate. This seems far less likely if competition emerges from abroad, even if it could mean a short-term rise in jobless numbers.

The one area that has not looked too healthy on Wall Street has been smaller companies. We in the UK appear to be mirroring the experience - as so often is the case. This is due in no small measure to the growth of indexation as a means of running portfolios and also reflects the increasing need for liquidity.

Whatever problems may beset the White House, it is important not to forget this is the largest stock market in the world - by a margin. Perhaps we may soon have to accept that the massive growth of personal savings in the US will ensure valuation levels never return to last decade's levels.

Brian Tora is chairman of the Greig Middleton investment strategy committee.