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
- Commodities: Structural vs. Cyclical: The key debate will continue for some time this year. We continue to discuss whether the commodity rally is structural (driven by underinvestment and supply deficits) or cyclical. A structural view justifies holding through volatility, while a cyclical view suggests profit-taking on parabolic moves. Our short term strategy is to take some profit in gold and copper in our offshore fund, monitor the gold/silver/platinum equity market momentum, reduce in local and global funds on short term momentum weakness. We can then decide to buy the dip if we have more conviction on a structural shift. For now, it remains a trading strategy.
- Geopolitical Risk & The “Trump Trade”: The market is driven by geopolitical uncertainty (“Trump Trade”), benefiting gold and EM. The November US election is the key catalyst; a Republican loss could unwind this trade, causing a sharp reversal in asset flows.
- SA’s Growth Puzzle: Despite positive fundamentals (low inflation, commodity boom), SA’s 2026 growth forecast remains low at ~1.4%. This suggests analysts may be underestimating SA’s potential, creating a value opportunity.
TOPICS
Technical Market Outlook
- Broadening Rally: The market rally is broadening beyond US tech into EM, small caps, and commodities.
- Bonds:
- SA 10-Year: Bullish trend since April 2025 is consolidating.
- US 10-Year: Trading sideways; the 30-year yield shows a bearish bias.
- Japan (JGBs): Under pressure, with yields rising.
- Currencies:
- DXY: Range-bound (96-100); the Supreme Court’s tariff decision is a key catalyst.
- Rand: Strong vs. EUR/GBP; consolidating vs. USD.
- Equities:
- US: S&P 500 and Nasdaq are consolidating at highs, lagging other markets.
- EM: MSCI EM broke bullish and is outperforming the S&P 500.
- SA: Resources are the standout performer
- Commodities:
- Energy & Agriculture: Weak, creating a disinflationary force.
- Industrial Metals: Breaking out (e.g., copper, rhodium).
- Precious Metals: Gold and silver are in strong uptrends.
Analyst Views and The Geopolitical Debate
- Goldman Sachs: Expects moderate 2026 equity gains driven by earnings. Sees India as a buy after its recent de-rating.
- Alpine Macro: Recommends rotating from gold to industrial metals due to gold’s parabolic rise. Remains constructive on US equities and small caps.
- Coronation: Optimistic on SA equities and property. Views resources as cyclical and gold shares as overvalued.
- Anchor: Highlights the asymmetry of risk in SA equities: a significant drop in metal prices, resource stocks could cause a 4-5% market decline over a 12 month period.
- Geopolitical Debate:
- The “Trump Trade”: The current market is driven by geopolitical uncertainty. A Republican loss in November could unwind this trade, causing a sharp reversal in asset flows.
- Structural Shift: The world is moving from global cooperation to self-reliance, which could lead to financial repression and higher volatility.
Next Steps
- Roeloff, Armin, & Gavin: Schedule a meeting with Catalyx to discuss using the AMC for more targeted hedging strategies.
- Roeloff: Find and share data on the valuation/performance lag between precious metal spot prices and mining stocks.
- Investment Team: Continue debating the “structural vs. cyclical” nature of the commodity rally to inform future allocation decisions.
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