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
- Strategy remains cautious but opportunistic on global and local markets; focus on protection and selective growth.
- The team is selective on China and EM; cautious on global developed markets.
- Overall outcome from the recent Strategic Asset Allocation meeting supports risk management and tactical flexibility across mandates – with the following neutral bands favoured:
- Cash: 10-12%
- SA Equities: 15–16%
- Global Equities: 11-12%
- Property: 13-14.5%
TOPICS
Market Positioning and Investment Themes
Feedback from Roeloff on Orbis Q& A session on Monday:
- Orbis continues to hold key positions like Rolls Royce and TSMC despite market fluctuations, reflecting confidence in long-term fundamentals and technology sector resilience.
- They focus on sectors with structural demand, including energy, healthcare, and consumer defensive stocks, aiming for stable long term growth.
- Governance concerns in South Korea and China prompt selective investment, balancing risk and opportunity with deep fundamental research.
- Emerging markets receive a nuanced view, with China favoured for long term stock picking based on government support and valuation discounts.
- The investment approach combines macro-overlays with bottom-up research to avoid overexposed or risky assets.
- Expectation of near term volatility around US-China tensions but with potential buying opportunities during pullbacks.
- Commodity investments focus on energy-related sectors (natural gas, nuclear, coal) crucial for AI and data center demand, despite environmental concerns.
- Defensive stocks like Kinder Morgan and certain biotech companies are gaining small but growing allocations.
- Fixed income holdings in emerging market sovereign bonds offer yields between 9% and 14%, reflecting optimism on credit quality and return potential.
Geopolitical and Macroeconomic Context
- The meeting underscored the critical importance of geopolitical dynamics and macroeconomic trends shaping investment decisions and risk management. The Russia-Ukraine conflict and US-China tensions underpin market uncertainty, with Russia and China forming a strategic partnership balancing technology and resource strengths.
- Sanctions and asset freezes highlight the importance of gold and precious metals as unfreezeable reserves, influencing central bank reserve policies globally.
- European nations like Poland and Hungary are increasing gold reserves to around 30% of total reserves, reflecting defensive monetary positioning.
- Global inflationary pressures and monetary policies remain volatile, with long term interest rates expected to surprise on the upside, prompting conservative bond and cash allocations.
- Government spending remains elevated across major economies, fueling inflation but also supporting GDP and corporate earnings growth.
- Currency movements, especially the Rand and Dollar, are closely monitored, with the Rand’s strength seen as a drag on local portfolio returns despite positive fundamentals.
Market Sentiment and Technical Adjustments
- Some team members’ sentiment score has shifted to more cautious views globally, especially in developed markets outside the US and South Africa, while momentum and technical guide tactical positioning.
- The US market maintains bullish technical patterns, though volatility and potential pullbacks are acknowledged.
- Sector rotation is expected, with financials and resources favored locally, contrasting with weaker industrial and property sectors.
- Commodity markets show dislocation with strong metals rallying, but energy remains mixed, reflecting supply constraints and geopolitical influences.
- Copper and industrial metals exhibit bullish breaks, supported by structural demand from AI and EV sectors.
- Crude oil inventories are low, balancing production and consumption, with prices influenced by geopolitical maneuvering, notably US-China-Russia dynamics.
- Crypto markets remain volatile and fragmented, with Bitcoin and Ethereum showing declines, but institutional interest persists amid regulatory and geopolitical uncertainties.
- Tactical moves include profit-taking in high-performing sectors, increasing protection overlays, and maintaining momentum-based discipline rather than attempting to time market tops or bottoms.
- The philosophy emphasises making decisions at the time, accepting outcomes, and avoiding overtrading or second-guessing moves in volatile markets.
- Continuous communication of positioning and rationale within the team supports disciplined execution and client expectation management.
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