Global Investment View Q2 2019

Here, experts from the Investec Global Investment Strategy Group (GISG) offer their insights into the factors informing their risk positioning for the quarter, the medium-term global outlook, how it will impact the South African economy, and what icebergs may lie ahead. 

The Global Investment Strategy Group (GISG) left its risk budget unchanged at neutral, having increased it at the December 2018 meeting from the modestly negative position that had been maintained since December 2017. 

Although growth fears have receded since December (global equities at the time of writing were up 12% in US dollars in 2019), we still see no evidence of the complacency that prompted our more cautious stance through most of 2018.  

We expect risk assets to further outperform insurance assets and cash over the next 18 months, as confidence builds in an extended cycle, driving earnings growth in 2019 and beyond. 

We are not advocating an overweight position in risk assets, however.  Our enthusiasm is moderated by “discontinuity risk” (Trump Trade/China, Europe/Brexit, Trump/Trade/Europe) and the spectre of rapidly revived policy risk (higher interest rates) if growth returns faster than expected.

"The 2020 US Presidential campaign, which will probably pit Trump against a left-wing Democrat, will be a test of the degree to which investors have become immunised to his polarising rhetoric," says John Haynes, Chairman of the Global Investment Strategy Group, and head of research at Investec Wealth & Investment UK.

"Ideally, for corporate earnings and share markets, growth in the rest of the world will gain momentum, even as US growth slows down (hopefully only marginally)," says Brian Kantor, Chief Economist, and Strategist at Investec Wealth & Investment SA.