Our Investment Committee noted a fairly quiet week for markets on the international and local fronts. Internationally, discussions focused on crypto currencies and the global struggle against the Delta COVID-19 variant. Locally, the team discussed the cabinet reshuffle and the impact of sporting success on SA morale. Jacques de Kock provides a summary below:
It’s been a rather quiet week this week, bar some exciting happenings on the sports field. We are seeing some Dollar strength again as well as an uptick in Emerging market indices, but no big moves other than that.
The week did see a recovery in crypto currencies with an improvement in sentiment in the short term. This could be a sign of an increase in risk seeking behaviour that should play out in the rest of the market, but it could also just be some crypto players trying to edge back the massive losses suffered a couple of months ago.
The Delta variant of the COVID-19 virus is still influencing markets across the world. Many emerging markets are struggling with the effects on economic growth, especially in countries like India, China and South Africa. And, although it seems like the developed countries are ahead in the race against immunity, the fight is far from over. The graph below depicts how even the US is struggling to control both daily new cases as well as daily new deaths:
A relatively quiet week in our home country as well, or from an economic perspective at least. The President’s cabinet reshuffle was mostly regarded as a step in the right direction but, unfortunately, didn’t raise many eyebrows. Former President Jacob Zuma has been admitted to hospital with many expressing condolences on various social media platforms and others getting a vague flashback of a certain Shabir Shaik and his escapades a few years ago.
But all the news was probably overshadowed by a wonderful (albeit scrappy) performance by the Springboks in beating the British and Irish Lions in the final test at Newlands. In general, South Africans tend to be motivated and encouraged by sporting events like these, bringing along hope and optimism and spreading it far and wide throughout our beautiful country. Our hope is that we see this optimism and encouragement overflow into our equity market as well and that we might see some foreign investors also getting into the Mzansi spirit.
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At MitonOptimal we utilise our proprietary optimiser to calculate a SA and Global risk rating. This is a rating out of 10, with a rating of 5 reflecting our neutral risk position, 0 being a totally risk-off stance and 10 totally risk-on. We review and set the tactical risk rating on a weekly basis at our global investment meeting, and the outcome of this review may result in a tactical tilt to our portfolios. In extreme circumstances we might review our strategic risk score. For example: when we declare a risk score of 4, it means we are cautious relative to our long term strategic asset allocation plan – alternatively, when we declare a risk score of 6 we are more aggressively positioned relative to our long term strategic asset allocation plan.
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Jacques de Kock
Quantitative Analyst & Portfolio Manager
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