A global insight for investors

The Nedgroup conference shot out of the starting blocks at the London Stock Exchange, with an insight into “Managing Risk at 350 km/h” by Mark Gallagher, a Grand Prix expert, managing several Formula One teams in a career spanning more than thirty-five years. This set the pace for an exhilarating week of detailed insights from multiple global authorities, about the world, and the economy of the day. Amongst many highlights, I would single out the thoughtful and “very Irish” presentation, “1922, the year the Modern World Began” by David McWilliams, a global economist, planting the seed that 2022 may be the start of a new world and economy, shaped by the extensive changes we are witnessing around us. 

Onwards to another insightful and informative conference with Ninety One, which included over twenty five global specialists, that was topped off by the first public engagement by General Sir Mark Carleton-Smith, Chief of the British Armed Forces, becoming an SAS soldier in 1990 and Commanding these elite units since 911 (2001), awarded an MBE, OBE, CBE and Knighthood, and whom was with President Volodymyr Zelenskyy in Ukraine two weeks before the conference, and subsequently retired. A mouthful, which is probably the best narrative for the experience of the conferences.

Investment insights that I can share with you, which can be summarized as follows:

The global economy is plagued by rapid inflation and the reaction of central banks, and especially a policy reversal by the US Federal Reserve, aggressively raising interest rates which is feared could lead to a global recession. This spooked global investors, who reacted by actively withdrawing from stock markets and causing large corrections:

The theme that stood out above all, is that formerly expensive stocks are now trading at discounts, which should reward patient investors. Good returns can be achieved through careful stock picking, whilst global cash and bonds are still to be avoided. Aptly put by Clyde Rossouw, Ninety One global fund manager, “this is a supply chain issue that is already priced in. China is re-opening after deep lockdowns, and supplies are coming online again. During the Northern Hemisphere summer, in which there’s less demand for energy, normality should return.”

Another theme that was repeated more than once, is the fact that investors need to actively allocate between asset classes and geographies, which is exactly how we have structured the portfolios we manage for you, over many years.

Umhlanga Rocks Wealth Management

What have we been implementing on the ground at Umhlanga Rocks Wealth Management?

Local unit trust portfolios

As you know by now, we actively manage your unit trust portfolios by allocating your capital to assets and sectors that can achieve outperformance whilst reducing extensive risk. During the latter part of 2021 and into 2022 we maintained high SA bond exposure that is still yielding close to 10% pa, whilst limiting SA stock market exposure, and holding almost no exposure to global stocks. We may not have had the best year compared to our own standards, but certainly limited losses when compared to the portfolios of other investors.

Share portfolios

Share portfolios are treated as the longest position within a diversified investment portfolio, and by nature, these accounts are overweight in stocks, without the ability to actively asset allocate, as we do in unit trust portfolios.

Local share portfolios

Unlike the “run of the mill” portfolios advocated by our peers, which ignored consumer weakness during the latter part of 2021, we focused on alternatives, such as logistics, agriculture, banks, bond ETFs, and commodity producers. We avoided consumer driven stocks and have reaped the benefits. Our portfolios have outperformed the local market and are still trading positively, whilst we are constantly reviewing our positions and seeking opportunities.

Global share portfolios

You may recall our letter of November 2021 in which we requested your permission to sell the large internet stocks, such as Alibaba, Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft and Netflix etcetera, which would lead to capital gains tax because of long-term profits. Most of you followed our advice and avoided the much larger corrections that these stocks incurred, up to 70% in certain counters. We maintained overweight positions in oil producers, shipping, defense companies, and high yielding UK stocks, which incidentally showed much less reaction to the fear in other parts of the world (note the lesser drawdown on the FTSE above). We have since bought back positions in the monopolies, such as Alphabet, Microsoft, and Meta, but are still avoiding Amazon and Apple, due to consumer and supply risk, and are also refocusing on the US economy, which is running record employment statistics, with accompanied wage growth. In my view, the US has become the geographical allocation of choice again. 

Conclusion

As investment specialists we constantly consider that we carry the burden of the financial well-being of the households we represent, and we do not take this responsibility lightly. We realize the importance that continuous returns play in keeping us all afloat, as after all “money, makes the world go around”. Therefore, we continuously seek knowledge, and upskill ourselves to ensure that your interests remain protected.

Feel free to give me a call to discuss any of the above, or your personal affairs in finer detail.

The opinions expressed in this article are the opinions of the writer and not necessarily those of PSG. The information in this article is provided as general information. It does not constitute financial, tax, legal or investment advice and the PSG Konsult Group of Companies does not guarantee its suitability or potential value. Since individual needs and risk profiles differ, we suggest you consult your qualified financial adviser, if needed.

PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider. FSP 728