With the next round of our Investment Committee Meetings upon us, we reflect on the main factors affecting our decision making at the moment, as well as some environmental reflection post the UN environmental study released last week. Locally, our conversations centered around the factors influencing SA risk asset exposure. Jacques de Kock provides a summary below:



Some painful truths were laid down last week in the UN’s environmental impact report with climate scientists reaching unequivocal consensus that most of the global warming causes are human made. This is something that we all must consider, not just in investment decisions, but also in everyday living.

“The document is ‘a code red for humanity’.”

– Antonio Guterres, Secretary-General of UN


“Our opportunity to avoid catastrophic impacts has an expiration date.”

“The report implies that this decade is truly our last chance to take the actions necessary to limit temperature rise. If we collectively fail to rapidly curb greenhouse gas emissions in the 2020’s, that goal will slip out of reach.”

– Helen Mountford, Vice President of Climate & Economics at the World Resources Institute

We also discussed the global factors that we feel currently (in the short term) have the biggest influence on investor behaviour. Our discussion covered:

  • The ongoing effects of Covid-19 and vaccination progress
  • Will the US taper QE causing receding global liquidity? The pace of Fed tapering is important
  • US and China infrastructure programs to stimulate economies
  • US and global inflation trajectory from here and its effects on commodity prices to re-ignite a global reflation trade
  • Resurgence of Covid-19 in China and government regulatory influence
  • Company earnings visibility harder due to these factors – especially EM
  • High valuations of quality US growth stocks a concern, but earnings supporting


South Africa

From a local point of view, it is important to factor in the political impact and foreign investor confidence on our market figures. We have been through many fund manager and company specific presentations over the last couple of weeks and there seems to be a general consensus that South African equities are (in general) rather cheap. This is very apparent when compared to historical values as well as to emerging market and developed market peers. We are, however, very cautious in going all-in solely based on this information as there are many factors that we feel are very influential when evaluating SA risk asset exposure:

  • The ongoing effects of Covid-19, vaccination progress, riots and lockdowns
  • Potential global reflation trade (weaker USD and higher commodity prices?)
  • SA political rhetoric – slow progress in positive and negative influences
  • Resurgence of Covid-19 in China and government regulatory influence (Naspers and Commodities)
  • Infrastructure headwinds and some long-term progress on outsourcing (Eskom and Transnet)
  • Social grants could stimulate spending and benefit SA Inc equities
  • SA equity valuations are attractive relative to history and global peer groups, but needs foreign investment to ignite more confidence



With all this being said, it’s still a very difficult time to be managing clients’ money. At MitonOptimal, we believe that it is our responsibility to manage our clients’ capital in a calculated and prudent way and to protect them from major negative market scenarios. Our goal is not to try and continuously outperform other portfolio managers and always have the ‘best return figures’, but rather to give our clients peace of mind that their capital is managed according to their requirements without taking undue risk.

It is for this reason that we are now, more than ever, cautious when looking at valuations and ‘betting the house’ on such metrics. With varying views and market factors at play, we feel that the diversification that a ‘multitude of counselors’ approach provides us, is the best way forward. We are therefore sticking to our strategic asset allocations and counting on diversification when the market is unsure regarding future events.


Risk Score

LOCAL: 4.5




Learn more about our Risk Score

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.


Jacques de Kock

Quantitative Analyst & Portfolio Manager



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.

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