Global Investment View Q3 2018

13 July 2018

Investec Wealth & Investment’s Global Investment Strategy Group (GISG) has retained its moderately “risk off” position in its outlook for the next 18 months. The central case remains that, driven by a supportive economic backdrop, owning risk assets will be rewarded relative to owning cash or fixed income over our forecast period.

Watch the video: Global Investment View Q3 and the South African investment outlook

 

"We’re going to see rising interest rates another 50 basis points this year and another 1% next year. That may be the end of the rising interest rate cycle"

Brian Kantor: Investec Wealth & Investment

 
 

"No asset class has delivered above 8% over the last 3 years barring offshore equities"

Paul McKeaveney: Investec Wealth & Investment

"No asset class has delivered above 8% over the last 3 years barring offshore equities"

Paul McKeaveney: Investec Wealth & Investment

 

What's in store for investors over the next 18 months?

Global Investment View Q3 2018

The Global Investment Strategy Group brings together the insights of Investec Wealth & Investment's professionals in the UK, South Africa, Ireland and Switzerland, mapping their outlook, setting a risk budget and identifying potential pitfalls that lie in the global investor's path.

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

Global investment view by Brian Kantor image

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.
Global investment view by Brian Kantor image
Alexandra Nortier
‘It is incumbent on us as wealth managers to try and manage clients' emotions throughout the cycles and keep them invested over time.’

Alexandra Nortier, Joint Head of Wealth Management

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What's in store for investors over the next 18 months?

Global Investment View Q3 2018

Disclaimer

 
Although information has been obtained from sources believed to be reliable, Investec Wealth & Investment, a division of Investec Securities Proprietary Limited or its affiliates and/or subsidiaries (collectively “ISL”) does not warrant its completeness or accuracy. Opinions and estimates represent ISL’s view at the time of going to print and are subject to change without notice. Investments in general and, derivatives, in particular, involve numerous risks, including, among others, investors capital risk, market risk, counterparty default risk and liquidity risk. No security, financial  instrument or derivative is suitable for all investors. In some cases, securities and other financial instruments may be difficult to value or sell. The price or value of such securities and instruments may rise or fall and, in some cases, investors may lose their entire principal investment. Past performance is not necessarily a guide to future performance. Returns and benefits are dependent on the performance of underlying assets and other variable market factors and are not guaranteed.
 
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