This week’s investment committee meeting focused internationally on bullish equity indices, the ever changing dynamic of the Russian-Ukraine War and supply shortages. Locally we discussed the lift of the National State of Disaster and the shift in our credit rating and provide rationale for the move in our local risk rating. Jacques de Kock provides a summary of this week’s investment meeting below:



Gerry started off our meeting this week with some bullish technicals on global equity indices. Throughout our analysis, it was only the Vix that continued its bearish trend from the last few weeks. It’s a different story when looking at the bond market, though, with the USA 10 Yr yield, China USD Government Bonds and the iShares USD TIPS indexes all in a bearish formation.

It felt like most of the risk-off trades have gone through the system and that we are seeing the first signs of some recovery. But on the other side of the coin, you have many pundits calling for a US recession as early as 2023. Walter de Wet from Nedbank states in their latest communication that: “With oil prices above USD100/bbl and the US Fed fund futures pricing a Fed funds rate at 2.5% by year-end, our probit model provides a strong signal for a US recession by early 2023. This would be consistent with the US yield curve that has inverted across different maturities, most notably the 2-year/10-year spread in recent days.” Gavin Betty also provided some insights, courtesy of Bloomberg and Truist advisory Services, that showed that US Treasury yield curve inversion has historically not been all “doom-and-gloom” as one might expect (or at least not in the short term).

Source: Truist Advisory Services

Other global events that grabbed our attention were the ever changing dynamic of the Russia-Ukraine war as well as the impact of the Chinese lockdown regulations and their “Zero Covid” policy. It seems like most of the bullish equity trades are because of positive news regarding peace talks in Ukraine. Our opinion is that it is too early to tell what Putin is going to do and how long this war will last. We do think, however, that the effects on supply shortages will be felt for some time still. This plays into our view that commodity prices probably still have some way to go before topping out. Wheat production and supply remains a cause for concern as Russia and the Ukraine combined accounts for almost a third of global production. This now begs the question; how will governments (especially in poorer countries) help out when faced with high increases in food prices and possible shortages in supply?


South Africa

In South Africa we finally saw the lifting of the National State of Disaster. This comes just after Moodys moved our credit rating outlook to “Stable”, making most South Africans feel all warm and fuzzy with all the good news over the past week. This clearly also rubbed off on our investment team as our technical analysis and general discussions were overall very positive. You would have had a difficult time in finding the bears amongst the bulls in this week’s local technicals, with only Naspers and the Resi sector still below trend, although they too seem to be edging higher. The Rand is continuing the strong run and most indications are pointing to this trend continuing for a while. Our bond market is also looking strong, with the possibility of foreign investors starting to nibble at the buying opportunities. When looking at our property sector we also feel positive in our outlook for the future. Although we don’t put a high probability on returns coming from rerating in prices, the possibility is there if foreigners start to dabble in our market. But even if that does not happen, you are still compensated for your support by some very attractive dividend yields (mostly in excess of 9%).



With the Ukrainian situation still in the balance, we are not yet willing to venture past our 4.5 risk rating for global assets. But our view on SA risk assets is supported not only by technical indicators, but also fundamental principles. We therefore move our risk score on SA to 5 with the portfolio managers having discretion to implement within the range of 4.5 and 5.5, depending on the specific mandate.


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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