T he pound sitting at a 26-year high against the dollar means bonanza time for UK shoppers looking to snap up cheap iPods and designer handbags in the US at a fraction of the cost at home. But UK shoppers for US equities and other investments have been almost non-existent, in spite of the power that the $2 to the pound gives to buy into corporate America.

According to Fidelity, the fund manager, the US stock market has become massively unpopular with British retail investors, who are clearly happier to buy the products of Apple than Apple itself.

Fidelity says that sales of North American funds accounted for less than 1 per cent of total gross Isa sales – just £5m – in April, traditionally a peak month for Isa investing.

Five years ago, the sector accounted for nearly 5 per cent of gross Isa sales, with monthly contributions totalling £44m.

The reluctance of investors is hardly surprising. Britons who invested in the sector five years ago have had to contend with a huge drag on performance because of the weakening dollar, which has fallen by around a third against sterling.

“The villain of the piece is the dollar,” says Bob Haber, manager of the Fidelity American Special Situations Fund, who says the dollar’s weakness has meant that the sector has delivered the lowest returns of any sector, including bonds, in the last five years.

An investment of £1,000 over the five years to the end of March would have grown to around £1,037, which Haber points out is less than savers have earned from cash.

This is despite the fact that both the Dow Jones Industrial Average and Standard & Poor’s S&P 500 have both recently been trading at record highs.

But some analysts are predicting that there could soon be a turning point in the currency movement, which is leading advisers to question whether this is the time to address heavily underweight positions in the largest equities market in the world.

Simon Dorricott, an analyst at Standard & Poor’s, says many of the global funds that the firm tracks are now correcting their underweight position in US equities. “We’ve seen a significant underweighting for some time across the board but there are signs that funds are moving back in,” he says.

And Cormac Weldon, head of US equities at Threadneedle Investment, admits: “The weakness of the dollar has been painful for investors. But we think it has reached a turning point. There is now an awful lot of weakness priced into the dollar and we think it has stabilised, which means it’ll come down to market performance again.”

And performance is set fair, according to Weldon, who says the US economy is looking good with growth predicted at 3 per cent, inflation falling and interest rates steady.

“We think you can get a good return out of US equities. The market is not expensive. It has a great breadth and depth, and is always going to be the only market where you can buy into household names like Google and Apple,” he says.

Weldon has reason to be cheerful as the Threadneedle funds are among the best performing, but investors have also been deterred by the underwhelming performance of many of the funds even with currency fluctuations stripped out.

According to Bestinvest, the independent financial adviser, fewer than one-third of active managers have on average managed to beat the market index over a three-year period for the past 20 years. This means that investors will have seen better returns from putting money simply into a tracker fund, or an exchange traded fund (ETF). Indeed, it is partly for this reason that some $64bn is held in ETFs that track the S&P 500 – clearly it is difficult to do better.

The problem is that the market is the most closely tracked in the world, says Tim Cockerill, head of research at Rowan, making it difficult to pick stocks whose performance is not already priced in.

“It is a difficult market to beat,” Cockerill says, who advises clients to maintain an underweight position in the region.

“There are a few decent funds from M&G, Jupiter, Martin Currie and Old Mutual, but generally it isn’t very attractive,” he adds.

But others argue that now is a perfect time to invest in US equities. The least an investor should do, says Roddy Kohn, managing partner at Kohn Cougar, is to invest in a tracker ETF, while the more canny investor should look at investing money into individual stocks. He says the accessibility of the US market makes it ideal for the amateur stock picker.

Although the S&P 500 is already at a historic high, Kohn says there should be further to go given earnings predictions, particularly in areas such as technology which is going through another boom period.

“Share prices in the US are very attractive compared with other markets. It is as good a time to buy now as it ever has been,” Kohn says.

He warns that the potential fall-out from the weaknesses in the sub-prime mortgage market means that investors should regard US equities as a longer term investment of at least three years.

Jonathan Armitage, head of US equities at Schroders, agrees that the US stock market should continue to prosper on the back of strong cashflows and dividend increases.

“Valuations don’t look overstretched, and we are encouraged by the number of large companies doing large share buybacks such as IBM last month,” he says.

But, ultimately, investments on US equities should be predicated on forecasts of where the dollar is heading next. And currency speculation is one of the most difficult bets around, says Armitage.

Investors are perhaps best advised to keep using their money to buy cheap electrical goods in the US and wait for a clear sign that the dollar has turned a corner.