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 “Great Debasement Trade” Drives Markets: Central bank rate cuts (Fed) and debt monetisation are driving asset prices higher, creating an “everything bull market” where currencies depreciate against each other.
- Potential SA Policy Divergence: SARB is unlikely to follow the Fed’s aggressive rate cuts, potentially making SA assets less attractive than international counterparts.
- New Neutral Strategic Asset Allocation (SAA) Model Approved: A variety of small asset allocation changes were approved (not all implemented at present) as part of the 12-24 month strategic asset allocation plan.
- Current Barbell Strategy Confirmed: The portfolio’s barbell strategy (combining a large weight in technology and basic materials relative to other sectors) will continue, using the recent commodity pullback as a buying opportunity.
TOPICS
SA Market and Economic Outlook
- Investor Sentiment: Foreigners are not buying SA equities yet, but have shown some interest in bonds, which have seen yields contract lower.
- Inflation & Rates: Inflation is expected to stay near 4%; a 25bp rate cut is possible this year, keeping real rates positive.
- Property Sector: Recovering, with the index up in the last month.
Global Market and Economic Outlook
- US vs. Global: US equities remain overvalued, powered by ongoing higher than expected earnings results and outperforming the MSCI World.
- Europe: Cautious outlook due to weak productivity, despite stimulus.
- EM Bonds: Attractive 6% yields, but with risk from high government deficits.
- Commodities: The Commodity Index is poised for a bullish breakout, needing energy and agriculture to join the rally.
- AI CapEx: Alpine Macro views AI CapEx as a mutually reinforcing investment, underpinning optimism for now.
Fund Performance and MitonOptimal Strategy
- Performance Dispersion: Massive performance dispersion in the SA high-equity and general equity sectors over one year validates MitonOptimal’s diversified approach.
Risk-Adjusted Returns: A risk vs. return scatter plot showed MitonOptimal’s core model achieved top-tier returns with below-average volatility over four years – the period since Jacques joined the current team.
Next Steps
- Monitor key technical levels (JSE Top 40, DXY) and global political uncertainty to inform tactical short term decisions.
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