Our 'House' view
Global Investment Review - Second Quarter 2010
One of our expectations for the current year was that volatility would increase as the markets grapple with a number of major uncertainties, in particular the speed and magnitude with which the unprecedented global stimulus is withdrawn and the longer term outlook for economic growth. The opening months of 2010 have indeed seen some sharp swings in prices across most of the major asset classes as investors moved quickly between the ‘risk on’ and ‘risk off’ trade.….
Our House View.pdf
Global Investment Review - February 2010
The markets rallied strongly in late 2009 as liquidity driven momentum continued to push stocks higher. Despite this, 2010 got off to a somewhat unsettled start, as fears of overheating in China grew, fiscal concerns increased and global financial reforms gathered pace. A new year also brought with it renewed focus on the sustainability of the global recovery. At what point will the Governments start to remove support? As one commentator questioned ‘…when the life-support is switched off, will there be a pulse?’ We take a look at some of the events of January….
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Global Investment Review - January 2010
Equities continued to rally through the end of September, but paused in October before pushing on further through November and December. Recent economic indicators have shown a broad return of economic global growth during the fourth quarter of the year. This has led to improved confidence in a sustainable economic recovery. Combined with the continued support of global monetary policy, this has created an environment in which growing numbers of previously sceptical investors, unsatisfied with continued low cash yields, have demonstrated the confidence to return to risky assets....
Our House View.pdf
Global Investment Review - Fourth Quarter 2009
Equities continued to rally through the end of September, but paused in October before pushing on further into November. Recent economic indicators have shown a broad return of economic global growth during the third quarter of the year. This has led to improved confidence in a sustainable economic recovery. Combined with the continued support of global monetary policy, this has created an environment in which growing numbers of previously sceptical investors, unsatisfied with continued low cash yields, have demonstrated the confidence to return to risky assets.....Our House View.pdf
Global Investment Review - November 2009
In the first of our new-look monthly updates, we look back at October and the mixed signals over the health of the recovery. Fundamentals continue to show a steady improvement, with GDP growth in the US suggesting the country has eased out of recession. A pause in the markets throughout October (depending on your point of view) could be interpreted as a consolidation point, a looming correction or simply a brief hiatus in an upward trend. The steady tick up in the VIX index, a measure of the cost of insuring against volatility on the S&P500 however, suggests increasing uncertainty. Investors are increasingly nervous of a correction and will be keenly looking toward upcoming economic data to provide more clarity and set the tone for risk appetite....Our House View.pdf
Our 'House' view
Global Investment Review
Third Quarter 2009
Introduction
Equities continued to rally through the summer, with gains now at 60% from the March lows but still significantly off their 2007 peak. Both government and corporate debt spreads have narrowed. Risk premiums on risky assets, previously at extreme levels following fears of financial collapse, have begun to normalise and prices of these asset classes have rallied.
This behaviour has not been confined to financial markets. The decision by households and businesses to cut spending at the end of 2008 led to an outright stall in economic activity. However, following aggressive monetary and fiscal stimulus policies and the gradual normalisation of credit markets, the global economy now appears to be exiting recession. Along with the revision of corporate earnings expectations from overly depressed levels, this has lent further support to the equity and credit rally....Our House View.pdf
Our 'House' view
Global Investment Review
Second Quarter 2009
Introduction
The performance of most asset classes over the June quarter has been consistent with increased levels of optimism amongst investors, most evident in the strong rally experienced by global equities over this period. The MSCI Global Equity $ index rose a fairly startling 20% for the three months under review, albeit from very depressed levels in March and led by emerging markets and Asia in particular.
Commodity prices rose sharply, with oil prices doubling from their lows. On the other hand, inflation fears resurfaced, leading to US dollar weakness and a sharp sell-off in government bonds, providing equity-like volatility on the downside.
Whilst the financial sector remains a net hoarder of cash, credit markets have seen a continued improvement, as reflected in a narrowing of spreads and gradually improving liquidity. Concerns over the solvency of the US financial system have been allayed by the stress tests carried out on the major banks, although there is less confidence in the European banking industry.... Our House View.pdf
International Investment Centre
Global Markets Monthly Update
May ‘09Global Outlook
As the market recovery continues, the question to ask now is, is this a bear market squeeze or something more substantial…
A bear market squeeze is a market rally that is usually triggered when cash holdings are high, yields are low and risk appetites bottom out. The attractive equity valuations then become compelling to the investor and money flows back into riskier higher yielding assets. When pessimism reaches its zenith (or nadir depending on your point of view) then a return to optimism is the natural progression. However, a bear squeeze is often a short-term rally as that is eventually undermined by continuing poor economic fundamentals. The position will become clearer after the upcoming season of economic performance indicator releases.
Looking back at markets’ performance in April, the best-performing asset classes were also among the riskiest, with equities and high-yield credit recording double-digit returns. This has to be seen in the context of markets reducing the ‘tail risk’ they assign to calamitous outcomes in light of somewhat less gloomy macro news. But given the ongoing recession, it would be wise to employ a degree of restraint toward taking on too much risk at present....International Investment Centre Monthly Update.pdf
International Investment Panel - House View
(FirstRand - Wealth Segment)
February 2009
Global Outlook
The economic outlook is deteriorating, with a prolonged recession inevitable.
The ‘credit crunch’ has become a household word in the last six months. Starting as a financial crisis in early 2008, that slowly gained momentum throughout the year up to the collapse of Lehmans, it then exploded across the globe in October 2008, and is now having a massive impact on the global economic system. Structural failings in the financial world have now led to a global economic downturn as significant as any seen since the great depression of the 1930’s.
This financial breakdown has led to a fall in consumption, leading to a rise in unemployment and finally into the first synchronized global recession in developed economies for over fifty years, with the bursting of the US housing bubble being the catalyst. The reaction of central banks has been unprecedented and swift, but it has not been smooth...Our House View .pdf
International Investment Panel - House View
November 2008Global Outlook
The outlook for the global economy is dire.
The bursting of the credit and housing bubbles has left markets reeling and the world facing severe recession. Global government reactions have been unprecedented, including the direct guaranteeing of bank deposits and the large cuts in government interest rates. The total cost of these reactionary measures is estimated at $3.5 trillion and rising.
Some thawing of the frozen credit markets has been evidenced through a moderate narrowing of spreads (the price paid by companies to borrow from the market over government borrowing) but overall, the various governments remain very much the only real avenue for credit with the usual money markets remaining shut. Liquidity still attracts a massive premium across nearly all asset classes........... Our House view.pdf
International Investment Panel - House View
August '08The macro economic outlook continues to deteriorate.
Credit conditions remain tight, reflecting a preference for liquidity and reluctance to lend by global banks, as they attempt to repair impaired balance sheets. The housing correction has gained traction across the world, although arguably the US is further through the cycle than other leading economies. Unemployment remains on the rise. Recent data releases suggest that recession or near-recessionary conditions are imminent for most Western markets. Current corporate earnings projections look too optimistic, particularly after stripping out any statistical rebound in bank numbers next year.
The deepening slowdown has led to a shift away from fears of stagflation (slower growth with rising unemployment) towards deflation, a process aided by the self-reinforcing reversal in energy costs and a broad spectrum of commodity prices in reaction to perceived demand destruction. Chinese exports remain under pressure.......... Our House view.pdf
