MEETING PURPOSE
Our investment team aim to meet every week to discuss the macro environment and how this could impact our current and future portfolio construction.
KEY TAKEAWAYS
- Global markets showing bullish trends, especially in equities and commodities
- South African capital market ‘exceptionalism’ evident in strong performance of JSE , SA Bonds, Property and Rand
- Potential geopolitical risks including US sanctions on South Africans require vigilance
- Team considering new protected equity notes with 15-25% downside protection from current levels
TOPICS
Global Market Overview
- Equity markets broadly bullish across developed and emerging markets
- Commodities showing strength, particularly gold and PGMs
- Bond yields rising in most BRICS countries except South Africa
- Dollar weakening against most currencies – the Rand is notably strong
US Economic and Political Developments
- Fed independence potentially at stake with Trump challenging Fed governor
- Short term rates likely to be cut, but long term bond yields remaining high
- Housing market and labour market showing signs of stress
- Top 10% of US companies driving most of stock market gains
China Economic Outlook
- Mild upturn in business cycle, supported by fiscal stimulus
- Credit impulse rising, driven by public sector
- Renminbi depreciation and weak commodity prices improving terms of trade
- Stock market potentially anticipating profit recovery
South African Market Performance
- JSE outperforming global peers, up 23-24% year-to-date
- Gold and PGM stocks driving gains, not yet fully reflecting higher commodity prices
- Banks and retailers showing mixed results in recent earnings
- Foreign inflows into SA bond market, but not yet into SA equities
Geopolitical Risks for South Africa
- Potential US sanctions related to Iran dealings and MTN investigation
- Risk of being removed from SWIFT system if sanctions escalate – very small probability
- Team emphasizing importance of diversification and offshore allocations
Protected Equity Strategies
- Considering new 3-year protected notes for JSE Top 40 and S&P 500 /Basket of Global indices
- Evaluating 15% vs 25% downside protection levels
- Balancing protection with upside participation in current high markets
Next Steps
- Review quotes for protected equity notes and decide on protection levels by end of week
- Assess allocation to new protected notes within existing portfolios
- Monitor geopolitical developments, especially US-South Africa relations
- Continue to balance South African and global exposures in portfolios
The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness.3