This past week saw the potential for peace after a 67-year war; a launched satellite to find extraterritorial life; President Ramaphosa announced an investment task team; and racism was called to order.
Dynasty – Thought Leading Article
In our previous three articles in this series, we outlined the pros and cons of passive, active and smart beta investment strategies. Dynasty believes that an optimal approach to managing a portfolio will blend all three strategies in a manner that optimises returns in the longer term, while mitigating the risks of following just one strategy.
Follow the link for an analysis of Dynasty’s approach to investment strategy.
Global News
- CIA Director Mike Pompeo has travelled to North Korea to arrange a possible summit between the Dear Leader and Donald Trump. On the 27 April, Kim Jong Un is due to make the first trip by a North Korean Leader to South Korea, with the possibility for the two countries to end their 67-year war. For more insight into this possible change in the Dear Leader’s attitude, see what Richard Javad Heydarian from Aljazeera has to say.
- Tesla is facing an uphill battle while Space X is launching successfully. Space X and NASA launched TESS an exoplanet hunter this week (for your weekly nerd dose follow the link) while Tesla workers have been sent home after poor delivery numbers, a recall, and an investigation into unsafe working conditions. Follow this link to an article written by Shoshanna Delventhal, from Investopedia, asking whether Tesla is too big to fail?
- According to research released by JP Morgan this week, based on forward consensus earnings estimates, the S&P 500 Index now trades at only 16 times forward earnings one year out, which is below the historical median (since 1995). This implies that the current valuation is lower than any time seen during the last five years, even lower than the 2014-2015 period when the outlook for equities appeared somewhat bleak. They say another compelling argument for valuation is excess balance sheet cash. At no other time in history have S&P 500 companies held so much cash at near record low-interest rates. This reinforces Dynasty’s view that the US and global equity markets do offer long and medium-term growth potential, despite the short-term volatility caused by Trump and interest rate levels in the US.
Local News
- As part of President Ramaphosa’s mission to improve investment in South Africa, he has tasked an A-Team consisting of former finance minister Trevor Manuel, Jacko Maree (ex-Standard Bank CEO), former deputy finance minister Mcebisi Jonas, entrepreneur Phumzile Langeni, and Trudi Makhaya to encourage investment in SA. Their aim is to help the country reach an ambitious five-year target of $100bn in fresh fixed investment. Follow this link to meet the team.
- Judge Nkola Motata was impeached this week by the Judicial Conduct Tribunal for racist comments he made while drunk. This week also saw the dismissal of Vicki Momberg’s appeal, while Mark Lamberti the CEO of Imperial resigned over inappropriate comments that he made to a former senior employee. Here is an article from the Daily Maverick describing what this means for the country.
- Julius Malema has become the target of the Afriforum. Malema will be facing private charges against him on alleged corruption-related incidents dating back to 2011. Malema’s tweeted response was, “Bring it on bloody racists, you don’t scare me at all. I’m born ready! No white man will decide my destiny, the poor masses of our people will…”
- The South African Reserve Bank Governor Lesetja Kganyago reiterated the bank’s preference for inflation to remain at the 4.5% target. Although inflation dropped to 3.8% recently, this is unlikely to be sustainable, especially in consideration of the VAT and fuel price increases, together with tobacco prices not yet reflecting the most recent hike in excise duties.
- The inflation figures and President Ramaphosa’s initiatives gave the rand a boost enabling it to break below 12.00 vs USD. Jan Cronje from fin24 comments on the resilient nature of the rand.
Source: Dynasty, Stanlib, Prescient, Daily Maverick, Moneyweb, Reuters, RMB, and Bloomberg Markets etc
