Chris Holdsworth

While there are strong tailwinds brewing across the globe – rate cuts and stimulus in particular – we are also cognisant of being late in the economic cycle. The key question is whether central banks can cut rates sufficiently quickly to prevent a material slowdown in growth. History suggests not. In such an environment we would like a sizeable margin of safety – which we do not currently find, especially in US equities. As a result, we remain underweight risk assets. That is not to say there are zero opportunities in the market. Valuation outside of the US is not stretched, and even in the US, it is possible to find reasonably priced assets.

In SA we expect strong equity and fixed income returns, even after the recent rally. While growth in SA is likely to still be muted, there is ample scope for beating even more muted expectations. We expect inflation to be around 3% by October –allowing for further rate cuts and compression in the local 10-year bond yield.SA equities are cheap in our view and should rerate as business confidence picks up.