Global Investment View Q3 2019

Patrick Lawlor

Editor, Investec Wealth & Investment

The Global Investment View for Quarter 3 2019 distils the outcomes from the most recent meeting of experts from the Investec Global Investment Strategy Group (GISG).

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Chris Holdsworth, Chief investment strategist from Investec Wealth & Investment, gives an overview of 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 reduced the recommended risk budget to a modestly “risk-off” position from Neutral - a stance that had been held since December 2018.

 

Our central case expectation remains that the current risk-asset friendly combination of global economic and corporate profits-growth together with low inflation will extend beyond the forecast horizon.  However, we perceive that the environment will become more challenging as we move into 2020 – which will add a contentious American presidential election to the mix of already inflamed global superpower politics. With risk asset valuations fair in the context of both low-interest rates and continued growth in profits, there is a limited cushion against negative surprises, whilst the possibility of them has risen.

 

Although we expect risk assets to rise in the near term as immediate icebergs are negotiated (Trump/Xi @ G-20), we believe it prudent to take a more cautious view of prospects over our 18-month forecast horizon.

 

"We have not made any major asset allocation changes this quarter. Our positioning is best thought of as “waiting in the wings,” says Paul McKeaveney, Chairman of the Asset Allocation Committee, Investec Wealth & Investment SA.

John Haynes
John Haynes, Head of Research, Investec Wealth & Investment UK and Chairman of the Global Investment Strategy Group

Global Equities have recovered strongly this year (in the case of US Equities, to new highs) and our expectation of rapprochement in the near term between Trump & Xi suggests that we are likely to see them move further upwards in the coming months.

Download the latest investment insights for Q3 2019

A settled trade environment would see some scope for earnings upgrades of 2019 forecasts but more importantly for investors to attach greater credibility to earnings growth projections for 2020.

Insights from the GISG

Key investor insights from the Q3 report

In the Q3 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

  • 2020 US Presidential Election: This is coming into view. Could a very left wing (anti trump but also anti-business) candidate become the Democrat nominee? 
  • Hot War / Oil Price Shock: Iran and the US are squaring up. Although it is hard to see an escalation beyond skirmishing (as there is no coalition of the willing), oil prices could begin to reflect the tensions. (See below). Any material rise would act as a tax on global growth.

On the SA Market

  • South African bonds (as measured by the All Bond Index) have been the strongest performing asset class, returning 12% over the last 12 months.
  • The past decade has seen near zero growth in electricity supply in SA. The load-shedding in Q1 was very disruptive to growth and saw a GDP print of -3.2%.

On Asset Allocation

  • We would like to see some more positive developments in some of the issues to begin to allocate more capital to domestic equity and property stocks

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.