Global Investment View Q3 2018

Your look into the most important investor insights for the quarter

Introduction to the latest quarter

The Global Investment View for Quarter 3 2018 distils the outcomes from the most recent meeting of Investec Wealth & Investment’s top strategic minds. 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

Our risk positioning for the quarter

The Investec Global Investment Strategy Group has retained its modestly “risk off” position for Q3. The Group believes the case remains that, driven by a supportive economic backdrop, owning risk assets (such as equities, commodities and emerging market assets) will be rewarded relative to owning cash or fixed income over the forecast period of the next 18 months. President Trump’s unpredictable and antagonistic engagement tactics are largely sighted as the key reason why the Group has not taken a more positive view. 

Download the latest investment insights for Q3 2018

From Trump’s bad maths to trends in European and emerging markets, get the full picture of what the Investec Global Investment Strategy Group believes is in store for investors over the next 18 months.

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

On the Trump in the room

On China (and Trump again)

On asset allocation

On the SA market

On economic global trends

  • Although the pace has decelerated, the world is still enjoying synchronised growth in all of its key economic blocks for the first time since the Great Financial Crisis.
  • The economic picture remains strong and there will be no policy mistake (either monetary or global commercial / political) to derail it; nor are valuations an impediment. 
  • The current economic (and earnings) cycle will extend into 2020 before it peaks. 

On the Trump in the room

  • A recurring theme is the ever-present and unpredictable potential iceberg that is President Trump. Were it not for the US’s hostile engagement with China and a growing number of other trading partners, the Group would have been more positively positioned. 
  • If the US continues to antagonise all her perceived trade adversaries at once, the likelihood is less that a global trade war results, and more that the US becomes isolated.

On China (and Trump again)

  • China and Europe’s softening should soon reverse, commodity prices have remained resilient and much further strength is not expected from the US dollar. 
  • The poor “maths” of threatening China are not lost on US businesses who will put pressure on the administration. The real winner could be the intended victim, China, which looks increasingly like a beacon of stability in an uncertain world.

On asset allocation

  • The positive outlook for global growth should be good news for emerging markets, SA equities and the rand.
  • A degree of rand recovery may be imminent. The committee almost unanimously forecast a degree of rand strength rather than further weakness.
  • Neutral exposure to equity risk has been recommended by the committee.

On the SA market

  • A positive outlook has been maintained for South African assets
  • Valuations across the main domestic asset classes are also more attractive than they were in the previous quarter.
  • South African risk assets continue to be upweighted at a slow, moderated pace.

Download the report to get the full picture

Paul McKeaveney
One of the issues that affects us most directly here in SA is the souring of appetite for emerging markets generally and SA specifically.

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

Rationale – why ‘risk off’?

The current “risk off” position held by the GISG is based on three key factors. Firstly, the Group holds a positive view on the growth and resilience of the global economy and corporate profits. It believes markets have acclimatised to the inevitability of monetary policy normalisation and likelihood of a monetary policy mistake in developed markets (led by the US) has fallen. Secondly, with the GISG’s view that the current cycle will peak in 2020, it is too early to begin moving the risk budget toward the defensive position it aims to have at the peak. Lastly, the GISG says it holds that given the US’s use of deliberately engineered crises to achieve policy goals, a “Trump Discount” must be applied – as these tactics are increasingly likely to backfire. 
John Haynes
Were it not for President Trump’s hostile engagement with trading partners, we would be more positive. Unfortunately, he cannot be ignored.

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

How we set our risk budget

Our Global Investment Strategy Group on how they set the risk budget and their outlook for the rest of 2017.

Brian Kantor
A strong rand that derives its strength from global economic growth will help all sectors of the JSE. It will be particularly helpful to the South African plays listed on the JSE that depend on the state of the SA economy.

Brian Kantor, Chief Economist and Strategist, Investec Wealth & Investment SA

Read the full report for Q3

Find out what the medium term SA market view is and see the full global and domestic asset allocation positioning for the quarter. 

More insights from the GISG

Read more articles and thought leadership from the investment experts of the GISG. 

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