08 Oct 2018

Global Investment View Q4 2018

Patrick Lawlor

Editor, Investec Wealth & Investment

The Global Investment View for Quarter 4 2018 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

Investec Wealth & Investment’s Global Investment Strategy Group (GISG) has retained its modestly “risk-off” stance going into the fourth quarter. This is based on the view that the world is largely still enjoying synchronised growth in all of its key economic blocks (the US, Europe, and China-centric emerging markets) for the first time since the Great Financial Crisis.

 

However, the combination of a soft spot in Europe, a strengthening US dollar and a highly aggressive US stance on trade has cast its durability into doubt.

 

"Going into the fourth quarter of 2018, we as the South African Asset Allocation Committee are more upbeat – SA risk assets are at similar, if not better, valuation levels than they were before Cyril Ramaphosa won the ANC leadership race last December," says Paul McKeaveney, Chairman of the Asset Allocation Committee, Investec Wealth & Investment SA.

 

"Outside of the 'fragile five' (Argentina, Brazil, Indonesia, South Africa, and Turkey) the world is largely still enjoying synchronised growth in all of its key economic blocks (the US, Europe, and China-centric emerging markets) for the first time since the Great Financial Crisis," says John Haynes, Chairman of the Global Investment Strategy Group, and head of research at Investec Wealth & Investment UK.

Download the latest investment insights for Q4 2018

We believe that China can and will use domestic stimulus to offset much of the material effect of any fall-off in export demand to the US precipitated by the trade war.
Brian Kantor
Brian Kantor, Chief Economist and Strategist, Investec Wealth & Investment SA

Our view is that China is, at worst, going to reveal a very soft landing for its economy. Satisfactory growth will be sustained, as will the demand for metals and minerals, for which China has become the largest buyer by far.

Insights from the GISG

Key investor insights from the Q4 report

In the Q4 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

  • The global economic picture remains good, in spite of recent weakness in some emerging markets.
  • The overall outlook is one of only modestly decelerated, but still largely synchronised and resilient, global growth in 2018 and 2019 (3.7% and 3.7%, according to recent forecasts from the IMF, reduced from 3.8% & 3.9% respectively).

On the SA Market

  • The third quarter was a disappointing one from a return perspective for South African investors.
  • Local assets classes struggled to take any clear direction over the quarter with returns in the range of -1% to +2%. Global equities were the clear winner when looked at in rand terms, up just over 7%.
  • Global government bonds were also well up in rands at one point, before giving up those gains up in September.

On Asset Allocation

  • We feel like there is more of a sense of urgency within the government to address our anaemic growth rate.
  • While it may not feel like we are moving forward quickly enough, we are moving forwards in terms of addressing corruption and delivery issues at the state-owned enterprises, SARS and other government-related institutions.
  • Both local and international investors are generally underweight SA assets – if there is a change in appetite for EM or towards South Africa in particular, prices could move favourably.

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.