Watch the video: Global Investment View Q3 and the South African investment outlook
Brian Kantor: Investec Wealth & Investment
Paul McKeaveney: Investec Wealth & Investment
Paul McKeaveney: Investec Wealth & Investment
The GISG positioning can be summarised as follows:
- Although the pace has decelerated, the world is still enjoying synchronised growth in all of its key economic blocks.
- The combination of a soft patch in Europe and a strengthening US dollar (which is usually problematic for emerging markets) has however cast its durability into doubt.
- We believe temporary factors are to blame, and the concerns about the strength of the global cycle will soon abate.
- The US is enjoying robust good health. Low unemployment is underwritten by tax cuts and increases in Federal spending.
- However trends in Europe and emerging markets are more questionable.
- China has also seen some (modest) self-inflicted growth softening. This has been the consequence of the authorities following through on promises to clean up the shadow banking system.
- The risks of a policy mistake by the world’s leading central banks has diminished. Led by the US, we are on a journey to normalise developed market monetary policy.
- However a Trump risk premium is justified for the medium term. A more aggressive trade stance in the US is now evident.
- Equity market valuations are supportive. For equities to become definitively expensive, much lower dividends or materially higher bond yields would be needed.
- Our judgement is that the economic (and earnings) cycle will extend into 2020 before it peaks. Were it not for the effects of the US’s hostile engagement with China and an increasing number of her trading partners, we would likely be more positively positioned.
SA market view and asset allocation – Seeing through the turmoil
By Paul McKeaveney and Brian Kantor
Despite the turmoil of the last quarter the SA Asset Allocation Committee has maintained its positive outlook for South African assets, largely premised on the input from the GISG that these effects are likely to be transitory and that the underlying strength in global growth and corporate profits would demand attention from investors. Valuations across the main domestic asset classes are also more attractive than they were in the previous quarter.
Moreover, the positive outlook for global growth should be good news for emerging markets, SA equities and the rand. A stronger rand, should it materialise, would mean less inflation to suppress domestic spending and perhaps lower interest rates to encourage it. But the global plays listed on the JSE would also see their US dollar values improve with more optimism about global growth, as would the resource companies that cater to global demand.
It is incumbent on us as wealth managers to try and manage clients' emotions throughout the cycles and keep them invested over time.
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About the author
Patrick Lawlor
Editor
Patrick writes and edits content for Investec Wealth & Investment, and Corporate and Institutional Banking, including editing the Daily View, Monthly View, and One Magazine - an online publication for Investec's Wealth clients. Patrick was a financial journalist for many years for publications such as Financial Mail, Finweek, and Business Report. He holds a BA and a PDM (Bus.Admin.) both from Wits University.
