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
- Alpine Macro’s Bullish Thesis: The S&P 500 bull market is in year 4 – 5 of a 10-year cycle, driven by genuine earnings (not re-rating) and disinflationary AI. A major oil price collapse is expected, fueling a final market upleg to ~10,500.
- Offshore Fund Portfolio Actions: over the last 2 weeks, we reduced Coronation Optimal Growth (due to poor momentum and 23% cash/derivates/bonds) and gold exposure (per Andy’s signals). Added to Janus Henderson Global Tech, Curate Emerging Market Fund managed by Robeco, iShares EM Value and Han-Gins Megatrend Tech funds. We are at Neutral US Equity now. We also bought long duration US Treasury ETFs as a diversifier with a view of a medium term inflation downside surprise.
- Performance Divergence: Orbis is up 47% (1yr USD) vs. Ninety One Global Franchise at 14%, highlighting the critical impact of manager selection.
- Key Risks: The SpaceX IPO is a major concern. Its large market cap (~$2T) will force passive funds to sell other stocks to buy it, creating a “funding trade” that could distort the market.
TOPICS
Market Outlook: Alpine Macro’s Thesis
- Chen Zhao (Alpine Macro) presented a bullish outlook, citing a 70–80% historical accuracy rate.
- S&P 500:
- Bull market is in year 4–5 of a 10-year cycle.
- Driven by genuine earnings growth, not a speculative PE re-rating.
- AI is disinflationary, boosting productivity and corporate profits.
- Projected cycle peak: ~10,500 (based on a Franklin Templeton theory calculation)
- Inflation & Rates:
- Inflation is not a long term threat.
- Productivity growth is outpacing wage growth, resulting in less wage pressure.
- The next Fed move is likely down, not up.
- Commodities & Oil:
- Bullish on most commodities (Copper, Uranium, Gold) but bearish on oil.
- Oil price collapse is expected:
- Historical pattern: Oil price doubles → collapses 50%+ within 6–18 months.
- Political catalyst: A Trump administration would likely push for lower prices and increased UAE production.
- Energy mix shift: Alternatives now supply >20% of global energy demand.
- Currencies:
- USD Bullish: Strong productivity growth supports a strong currency.
- ZAR Bullish: High real interest rates and commodity exposure are supportive.
- JPY Bearish: Weak Yen is the only thing supporting the economy.
- China:
- Still faces the affects of a major property bubble, causing a 40–50% loss of net worth for many citizens.
- This has intensified the savings culture and created a deflationary environment.
- China is recycling its trade surplus from US Treasuries into real assets (commodities, ports).
- China tech is a “hold” and we will compete with the US in a parallel tech ecosystem.
Technical Analysis & Market Divergence
- Market Concentration: The S&P 500’s year-to-date gains are almost entirely from AI-related stocks.
- US Equities: Dow, S&P, NASDAQ and Russell 2000 charts are all bullish.
- Russell 2000: A potential future overweight, as lower rates would benefit small caps.
- SA Equities: JSE Top 40, Mid-Cap, and Resi charts show lower highs and look vulnerable.
- Commodities:
- Industrial Metals (Copper, Aluminum, Zinc): Strong bullish charts.
- Precious Metals (Gold, Silver, PGMs): Vulnerable, with lower highs.
- Crude Oil: Bullish break, but the forward curve is in backwardation (lower prices in the future).
- Crypto: Bitcoin and Ethereum have failed at resistance and look poised to test lower support levels.
Portfolio Positioning & Performance
- International Managed Flexible Fund:
- YTD USD return: +7% (outperforming the Dow ).
- Asset allocation is near strategic neutral (70% global equity), explaining performance vs. MSCI World (7% return is 70% of the index’s ~10% return).
- Manager Performance Divergence was discussed (1-year USD):
- Rationale: The market is ignoring “quality” factors (balance sheet, cash flow) in favour of high-growth tech.
Future Tech discussion on Photonics
- Concept: Using light (photons) instead of electrons for data processing.
- Benefits:
- Energy Efficiency: Saves ~90% of electricity.
- Speed: Orders of magnitude faster data transfer.
- Materials: Uses silicon instead of copper.
- Current Challenge: Performance gains are offset by the time required for light-to-electric conversion.
- Long Term Impact: A potential “sea change” for data centers, reducing energy costs and copper demand.
Next Steps
- Continue monitoring the SpaceX IPO for its potential market impact.
- Review the RAFI index’s energy overweight, given the bearish oil outlook.
- Oscar – Send research on photonics technology to the team.
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.