MEETING PURPOSE
Our investment team aim to meet every week to discuss the macro environment and how this could impact our current and future portfolio construction.
KEY TAKEAWAYS
- The team remains cautiously bullish on commodities and optimistic on South African equities, supported by improving fundamentals and global stimulus.
- Gold and gold miners remain key portfolio hedges, with some forecasts pointing to $4,000–$5,000/oz within 12 months.
- Oil shows a 1.5M barrel/day supply gap, precious metals strong but volatile, and agricultural commodities remain weak.
- Fixed income remains mixed: Brazil offers attractive real yields (~9%), while Europe faces pressure and the US curve stays range-bound.
- Dollar strength dominates global sentiment; the Rand trades around 17.30–17.50, moving in line with USD trends.
- Geopolitics continues to shape risk sentiment, underscoring the need for defensive assets.
- Small risk increases in select funds, modest additions to property and resource ETFs, and continued focus on equity protection in SA portfolios.
- Volatility is seen as a buying opportunity while maintaining a balanced, disciplined allocation approach.
TOPICS
Market Outlook
- Team maintains cautiously bullish outlook on commodities, despite sell-off this week.
- Optimistic on South African equities due to improving SA fundamentals and global fiscal stimulus supporting risk asset prices in short term.
Global Investment
- We remain confident in gold and gold miners as a Global and SA portfolio hedge.
- Some research is indicating a level targeting $4,000 to $5,000 per ounce in next 12 months.
- The team recognises the need for ongoing review of exposure to gold shares versus PGMs and industrials to capture sector rotations and optimize returns.
Commodity Analysis
- Oil faces supply gap of 1.5 million barrels per day; precious metals show strong six-month performance, but short-term volatility can persist at current levels.
- Agricultural commodities remain weak.
- The group debated whether commodities might start to decouple from Dollar strength, possibly gaining independent momentum if supply constraints tighten further.
Fixed Income Trends
- Brazil leads with real yields near 9%, but political instability a risk. European bonds under pressure from weak data and refinancing risks. The US yield curve’s 10-year minus 2-year spread has been range-bound for two quarters, indicating a calm but watchful fixed income environment.
- Currency markets reflect these dynamics, with the US Dollar Index (DXY) holding strong support at 96 but testing resistance at 99, a critical level to watch for a bullish break.
- The Euro has broken key resistance levels, showing strength and a bullish technical break versus the Dollar.
- The South African Rand has traded to around 17.30-17.50, linked more to Dollar moves than local fundamentals, and is expected to remain range-bound unless the grey listing status changes. Roeloff stressed that the
- Dollar’s strength remains a dominant global driver, with short Dollar positioning being a common consensus trade despite uncertainty.
Geopolitical Impact
- Ongoing Russia-Ukraine conflict and energy reliance reduction intensify risk sentiment, highlighting the need for defensive assets or protection.
Portfolio Strategy
- Portfolio risk was increased/adjusted modestly in Funds with regular inflows. Small additions to property (0.3%-0.5%), managed SA Bond duration exposure last week and RESI ETF purchases on Tuesday and Wednesday amid price collapse (between 0.7% and 1% in Growth fund mandates only), reflecting confidence amid market headwind for Gold and tailwinds for equities.
- Volatility is viewed positively as it creates buying opportunities, particularly in gold and resource stocks, which remain underpinned by fundamental demand and geopolitical risks. The team recognises the need for ongoing review of exposure to gold shares versus PGMs and industrials to capture sector rotations and optimise returns.
- The team noted the importance of portfolio equity protection in SA Equities to comfortably pursue these risk positions.
- Balanced portfolio approach with modest risk increases where inflows and market sell-off create opportunities; focus on protecting against volatility while targeting growth potential in commodities and equities.
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.3