08 Apr 2019

Global Investment View Q2 2019

Patrick Lawlor

Editor, Investec Wealth & Investment

The Global Investment View for Quarter 2 2019 distils the outcomes from the most recent meeting of Investec Wealth & Investment’s top strategic minds. 

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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. 

Executive view of the quarter

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.

Download the latest investment insights for Q2 2019

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.
Paul McKeaveney
Paul McKeaveney, Chairman of the Asset Allocation Committee, Investec Wealth & Investment SA

The market performance is a sign that concerns about a material slowdown in global growth into the back of 2018 were overdone.

Insights from the GISG

Key investor insights from the Q2 report

In the Q2 report, the GISG offers comprehensive insight into global investment trends and potential icebergs. Here are some of the key take outs: 

On economic global trends

  • Growth fears are receding and we retain a positive view on the outlook for global economic growth and corporate profits. 
  • Monetary policy transition risks remain low.
  • Valuations of risk assets are fair – neither expensive nor cheap.

On the SA Market

  • 2019 has started very brightly for investors, both from a domestic and offshore perspective.
  • The market performance is a sign that concerns about a material slowdown in global growth into the back of 2018 were overdone, and that risks of a monetary policy mistake (notably in the US) have receded.

On Asset Allocation

  • We upgraded our global equity risk score in December 2018, which turned out to be the right call given the subsequent market performance in the first quarter.   
  • Inflation-linked bonds are also looking attractive at a real yield of 3.25% at the time of writing.

About the author

Patrick Lawlor

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.