The Harbour Wealth team recently attended the annual Investment Forum at Sun City. This is where both Local and Global Asset managers get to have vigorous panel discussions and give presentations to the local Financial Advisor community.
It is not all business. There is, as usual at a Sun City conference, an evening function. You would think that some of us never get to let our hair down (those who have hair), but that’s a discussion for another time…
What came out of the panel discussions is interesting, to say the least.
The Local markets/Economic outlook for the next 12 months is not a happy scenario. Kevin Lings, Economist at STANLIB Asset Management, painted a picture which no-one really wants to hear, but which is the reality of the situation.
In the past few years SA job creation in the government sector has been a stimulus for growth, leading to an increase in consumer spending. This has driven economic growth. The government as we know is cash strapped and can no longer do this. To maintain levels of growth the Private sector will need to step up. Essentially we need to now start investing in the local economy.
The question is… Are companies prepared to do this?
Over the past two to three years there has been a disconnect between the Financial Markets and the Economy, with the markets continuing to perform well, despite the sluggish economy. This is unlikely to last.
Offshore markets have always been an attraction for the SA investor. Considering the South African market makes up roughly 1% of the world market, it seems crazy to restrict ourselves to such a small pond.
During the era of Quantitative Easing (for the layperson: this was the US government pumping money into the US economy, $4.5 trillion), America created huge growth in their economy. Hundreds of thousands of jobs were created, which again led to increased consumer spending. A problem is that the many of the new jobs created were at lower average wage levels, so although there are more jobs, the positive economic knock on effects have been disappointing relative to previous periods of similar employment. This is likely to change at some point. Another potential negative to watch is, as the dollar gains strength, US exports may become more expensive to the rest of the world.
Despite these concerns, the US is a market that remains attractive.
Europe has now started Quantitative Easing to try and stimulate the economy. The idea is to weaken the Euro, create growth, resulting in their exports becoming more attractive to the rest of the world. The sentiment is fairly dampened around these two large economies. Although opportunities do exist here, caution is recommended.
Emerging Markets (EM) have been the major talking point over the last 18 to 24 months, but growth prospects have also dampened. One reason is that they have not invested enough in themselves, much like South Africa. China is no longer the “Belle” of world growth anymore, together with all other ‘BRICS’ baring India (Brazil, Russia, India, China, South Africa) which are currently not in favour with many Investment Managers.
All this does sound a little gloomy, let’s make no mistake there is cause for caution, but there are still plenty of exciting investment opportunities.
With all the information we gathered at the Investment Forum, we at Harbour Wealth have made some changes to our Model Portfolios. We had a small tilt towards the Coronation Industrial Fund which we have decided to remove. We feel that Industrials have done well over the last 12 months, and we would prefer to bank the profits from them and look elsewhere. We have also reintroduced the Nedgroup Property Fund into the portfolios. We like the strategy that the fund managers (Grindrod) employ in this portfolio, especially with regard to protecting capital. It focuses on small to medium size companies, thus providing further diversification to the index property component of our models.
Now on to an exciting second quarter!
For any further information please visit our website: www.harbourwealth.co.za
Senior Wealth Planner