Our investment committee meeting discussions centered internationally around the bullish technicals currently being displayed, the energy crisis with the Northern Hemisphere winter looming and the debate around stagflation. Locally, we looked at the impact of loadshedding on the economy whilst we eagerly await the results of the local elections next week. Jacques de Kock provides a summary of this week’s investment meeting below:



Our technical charts have turned more bullish this week with risk appetite on a slight upslope. Most currencies are looking strong versus the Dollar especially the GBP and the CNY. On the equity front, most indices are also looking up with only a few EM counters staying behind. We are also seeing value counters in the Russell 2000 and the iShares EM Value breaking through short-term moving averages and turning bullish.

Over the short term term we feel that the USA 10-year yield could be a cause for concern.

Energy is still one of our main topics of discussion. There is still a long way to go before we can look at the world and say that renewables and green energy are ready to go and able to supply what is being demanded. Unfortunately, we are not seeing the investment into current sources and providers of energy needed to sustain household and industrial usage. It is most certainly an issue for countries going into their winter season and could cause even more problems over and above what has been felt in the last three weeks.

The biggest discussion is still relating to inflationary pressures within a global context and it’s clearly not just the MitonOptimal Investment Team that’s thinking about this, indicated in the graph below 

Chart of the Week: The Stagflation Story

Source: Bloomberg, GS Investment Research and GS Asset Management

The die-hard transitory fanatics are keeping to themselves a bit more these days and it’s easy to see why. Although we still think the situation is not as binary as most market participants make it out to be, it is clear that one side of the argument is shouting louder than the other. Our view on this is that there is still too much uncertainty in the market to be throwing around the “s”-word (as mentioned in the graph above) and we are cautious of being overly pessimistic with our asset allocation decisions. 


South Africa

Similar risk-on tendencies have played out in the local market over the last week. We saw SA Equity indices turn bullish (albeit in the short-term) and the Rand picking up nicely against the Dollar and other DM currencies. We are still in bearish territory with our government bond yields and the financial sector also seemed to have made a bearish turn.

The major local topics centered around the municipal election next week and the re-appearance of our old friend, loadshedding. Eskom is clearly going through a tough time and the own-goal count against themselves is not helping the cause. This is also putting added pressure on a South African economy that is begging for a positive catalyst to lift itself out of a possible slump.

It is also going to be interesting to see how the reduction in support of the two biggest political parties in SA is going to impact the overall governmental setup. With preliminary polls (inaccurate as they have been in the past) suggesting that some interesting coalitions might be on the cards. At this stage it’s still just speculation, but we are keeping a keen eye on developments.



We are still positive on our technical signals and remain on a 5 risk score for local assets and a 4.5 risk score globally. But as Gavin Betty so eloquently put it:

“We definitely want to stay at the party…But we should be dancing close to the door and checking all the windows, ready to leave before the tequila really starts flowing.”


Risk Score





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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