Our investment committee meeting discussion centered internationally around the findings at the COP26 Climate Change Conference, bullish global equities and the ongoing energy crisis as the Northern hemisphere moves into winter. Locally, we discussed the SA Rand, SA Listed Property and the catastrophic pressure loadshedding is putting on the local economy. Jacques de Kock provides a summary of this week’s investment meeting below:



There have been some interesting findings out of the COP26 Climate Change Conference with mostly positive responses, it seems like the world is little more “upbeat” for a change. Although we are not confident that this warm fuzzy feeling will last for long, the market seems to be overall bullish.

Our technical analysis this week shows an upward trend for most global equity indices, with only the Hang-Seng, Shanghai and Kospi turning down slightly. Looking at a longer-term graph for the MSCI World index, it’s clear that all G7 indices are pushing up with new highs almost every week.

MSCI World Index over the last five years

Source: TradingView

This is extending to Japan, EuroStoxx 50, FTSE 100, S&P 500 as well as Russel 1000 Value Index.

The energy story (or lack thereof) remains a concern though. With global constraints and shortages, there is still a focus on how Europe and the US (going into winter) are going to handle the situation. In part, Biden tried to convince OPEC+ to produce more to curb the usage of the US Strategic Petroleum Reserves, but was unfortunately unable to do so.

On the other side of the world, China is ramping up their coal output in an effort to alleviate the winter supply shortage. And although China is at the forefront of many of the green energy initiatives, their demand for energy is just too high to be sustained by green energy only.

Global bonds are also looking up as yields drift downward. On the back of the US Infrastructure Bill being approved there seems to be US Dollar strength again, although it’s clear that most of the information was already priced in by the market. This is playing into the idea of a commodity super cycle being on the cards. With some countries looking to bolster growth by infrastructure spend (and more to be added in the future), this bodes well for commodity prices in the future.

We also discussed the current interest rate environment with Roeloff Horne noting that (bar certain despots) most of the world’s central bankers and politicians don’t have a long-term mandate when it comes to policy and implementation. They mostly have 4- or 5-year terms and will be looking to kick the difficult long-term decisions down the road for as long as possible. This should mean lower interest rates and ongoing stimulus for longer than most might think.

In general, our quote of the week was provided by Andy Pfaff (channeling Peter Brandt):

“Trade what you see, not what you think”

– Trader’s Lore


South Africa

After some unfortunate events on the cricket field for the Proteas (not qualifying for the T20 World Cup Semi-Finals) and the rugby also looking a bit weak at times, at least the Rand is turning strong. The local election also saw a big part of South Africa taking a stance on corruption and lack of service delivery by not going to the voting stations at all. This had a massive impact on the ruling party’s support (moving below 50% for the first time since before 1994). The DA also had a knock in support, but there were many smaller parties that benefitted handsomely (one of which was Herman Mashaba’s ActionSA).

Similar risk-on tendencies as seen globally have played out in the local equity market over the last week. On the back of a massive deal being signed to reduce South Africa’s dependency on coal and “dirty energy”, 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.

We had a decent discussion on SA listed property as well with focus on vacancies in the office space sector as well as renewed demand for free standing homes within gated communities especially in Cape Town and the greater Western Cape. Our conclusion on property is that, although there are some fundamental headwinds pushing against this sector, it is still very unfavoured in the market. The important factor is that it not only provides a great diversification benefit versus other asset classes but can also be seen as an inflation hedge and will also benefit greatly from a resurgence in tourism and general recovery in South Africa. This prompted the decision to move from an underweight to neutral allocation in property in the portfolios that are not there already.

Once again, Eskom has given us much to discuss with the mood turning more somber on the thought of loadshedding going to stage 4. It is very clear that loadshedding is here to stay and the impact thereof is having catastrophic consequences for our local economy.



All the topics mentioned above are making our life difficult in deciding the direction of the various asset classes both globally and locally. Our view is that the factors pushing markets upward are winning at the moment, so we are sticking to our risk scores. We are, however, very focused on news in the market and are ready to go conservative if our indicators tell us to do so.

Therefore, 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, with local property moving to neutral in the portfolios where it is not on neutral already.


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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