This week’s investment committee meeting focused internationally on the bearish technicals, China’s zero-COVID policy and the impacts of the ongoing war in Ukraine. Locally, we discussed the equity market and the renewed interest in SA government bonds. Jacques de Kock provides a summary of this week’s investment meeting below:



Gerry Grispos started the meeting off with the International short-term technical charts. Although the main theme is still looking rather bearish, there are some signs of optimism coming through the graphs. Global equity indexes are mostly bearish, but we are seeing short-term bullish tendencies from the Vix, FTSE 100, the FTSE All Share and the Sensex. It still seems like a risk-off market though, as investors all over the globe search for protection from “seemingly imminent” stagflationary pressures. China is trying to stomach the aftereffects of its zero-COVID policy with news coming out that the government will have a more favorable outlook on gaming and tech companies. This unfortunately did not help much, as the equity index continued to trend lower throughout the week.

We are also seeing earnings forecasts being downgraded across most sectors. According to Credit Suisse, Financials, Communication Services and Consumer Discretionary are estimated to have the worst negative revisions of the global equity sectors. But what is clear is that it is not just a developed market trend, as can be seen in the graphs below:

The US 10 year bonds as well as the TIPS are in bearish territory with the only protection coming in the form of a strong US Dollar. It is difficult to predict what the catalyst for a recovery would be and how long it would take. As we have said over the last month or so, it seems that the war in Ukraine could be extended for a while still and even if Putin does decide to exit his conquest, the effects will still be felt for years thereafter.

We are concerned about growth forecasts for developed market equities given the inherent risks, and with China and Russia under immense pressure, the emerging market space is also not that great.

The only countries still keeping their heads above water are those with economies linked to the commodity trade, i.e. South Africa, Brazil and (to a lesser extent) Australia and New Zealand. We expect risk assets to remain volatile for the foreseeable future, especially in the commodity space.


South Africa

In contrast to last week, the South African equity market had a bit of a pull back this week. With the ALSI and Top40 only edging above their 21-day average, it’s still looking positive for the short to medium term. There seems to be renewed interest in our government bonds, as the R186 and the R2030 continue the bullish trend from last week and property also looked up after a difficult first quarter of 2022.



There are many headwinds in equity markets at the moment. In the US and the UK, inflation fears and energy costs are keeping investors out of the equity markets, and back home we are dealing with politics, growth problems and the weather wrecking havoc in KZN.

Overall, we are more comfortable with our risk asset exposure within our models, being quite cautious since quarter 3 of last year. Within our funds we are moving our local risk score to 4.5 and our global risk score to 4, with portfolio manager discretion to move 0.5 higher in each area should they see fit. Our aim is to protect our clients’ capital from permanent losses, and it is for that reason that we are being cautious in these volatile times with a keen eye on buying opportunities should they arise.


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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