Artificial Intelligence in an ever-changing investment world

Feel free to reach out to PSG Wealth Manager Dawie Klopper directly.

Over the past year, the macro environment has been characterised by:

• Sticky inflation and high interest rates.
• The ongoing war in Ukraine…
• ... and the Hamas-Israel conflict, recently suddenly and unexpectedly escalating into a war which might impact the world order – something which may happen if the war expands and a country like Iran gets involved.
• However, commodity and most agricultural prices have declined, despite this geopolitical uncertainty the world is faced with.
• The US Federal Reserve (the Fed) and other central banks are still maintaining high interest rates to manage inflation expectations down. Sometime last year, the influential Economist magazine published a front-page article about the Fed having lost its credibility, and the policymakers were hard hit by the criticism.
• The US yield curve (short-term interest rates minus long-term interest rates) is still inverse... and, as in the past, this might be an indicator of a US recession.
• China is struggling to stimulate economic growth and, as South African investors, we see this in the somewhat underwhelming performance of Naspers/Prosus via Tencent, and Richemont.
• Locally, it’s all about infrastructure failure (think Eskom, Transnet, and cholera), and the fact that we maintain a so-called neutral geopolitical stance – all of which are environmental factors making it difficult for South African corporates to perform well.
• Unemployment is still at scandalously high levels in South Africa, which is due in particular to the economy not growing fast enough to create jobs.
• Domestically, the focus is also moving to next year’s elections… but forming coalitions is extremely frustrating and at present, it doesn’t look as if there will be enough momentum to push the ANC out of power.
• The rand is weak, even after the recent strengthening, but the only important thing to remember is that the movement in commodity prices in particular is impacting the rand. As commodity prices are currently weak, so is the rand. Other factors such as load shedding and our government’s strange foreign policy also contribute towards the rand’s struggle.
• In the meantime, US markets have been supported by artificial intelligence developments (seven big tech companies), but that market has now also come under moderate pressure (5% down since July 2023).
• In South Africa, the JSE All Share Index soared to 80324 points in early 2023, but has lost ground since, due to various events. The index is now at 71886, which is 10% lower.
• As a result of all these developments, US equities are currently priced appropriately and the JSE All Share Index is very cheap (for a reason).