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
- Gold and gold miners showing strong bullish momentum; seen as attractive amid global economic uncertainties
- Rising long term bond yields in developed markets raising concerns, especially for countries like France with high debt levels
- US equity markets still supported by potential Fed rate cuts and strong corporate margins, despite some sectors struggling
TOPICS
Gold and Precious Metals Outlook
- Gold breaking out of 6-month consolidation, targeting minimum of $3700
- Gold miners (E.g. Anglo Gold, Gold Fields) seen as undervalued relative to gold price moves
- Silver lagging but gold/silver ratio tightening
- PGMs (platinum, palladium, rhodium) also showing strength
- ETFs like Sprott Gold Miners (SGDM) and streaming company Wheaton Precious Metals surging
Bond Market Dynamics
- Long term bond yields rising sharply in developed markets, especially Japan (30-year JGB yield highest since 2008)
- Concerns about sustainability of high debt levels, particularly for countries like France and Italy
- Potential for central banks to restart QE programs to support government funding needs
- South African 10-year bond yield at 9.56%, below 10-10.1% “fair value” estimates
US Equity Market Outlook
- Morgan Stanley’s Michael Wilson turned bullish, citing potential Fed rate cuts and strong corporate margins
- Theory that US has been in “rolling recession” since 2022, masked by AI/tech spending
- Equities historically perform well during Fed cutting cycles (8.3% average return, 91% hit rate)
- Lack of attractive alternatives (E.g. bonds) supporting continued equity inflows
South African Market Dynamics
- Banks and retailers screening as value plays (7-10% dividend yields) but lacking foreign inflows
- Political uncertainties and weak economic growth weighing on sentiment for “SA Inc” stocks
- Commodity producers benefiting from global trends, supporting fiscal outlook
European Political/Economic Challenges
- Rising social tensions around immigration policies and wealth inequality
- Potential for political instability as governments struggle with fiscal constraints
- Questions about sustainability of EU structure long term
Next Steps
- Consider reducing European equity exposure in favour of US and gold/precious metals
- Ensure sufficient cash levels in portfolios to take advantage of potential market dips
- Research team to dig deeper into Morgan Stanley’s bullish equity thesis
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