With wars raging in Ukraine and the Middle East, as well as elections in countries homing around four billion people, 2024 was always expected to be turbulent. With this in mind and following a 26% recovery for the S&P 500 in 2023, we, and most economists, started the year with relatively modest expectations in terms…
Within a few days from now, Donald Trump is set to be inaugurated as the 47th president of the US. His return to the White House is, as we have noted in previous newsletters, cause for both trepidation and anticipation for equity markets, given his promises to slay many of the sacred cows in modern…
At the outset of 2024, some of the more optimistic banks and analysts forecast that there was scope for the rand to power to R16/$ by the end of the year. But despite the optimism surrounding the formation of the Government of National Unity (GNU) and hope for interest rate cuts in the US, the…
For many years, trusts in general were not subject to punitive tax and regulatory scrutiny, which made them the most tax-efficient vehicle for high-net-worth families to preserve wealth and pass this down to their heirs. However, tax authorities around the world have increasingly tightened up on many of the loopholes that once made them so…
In one of our early newsletters for 2024, we said that “there may be scope for acceptable returns, albeit at lower levels than 2023” As it turns out, 2024 has been a record-breaking year for equities – driven by the US – that has exceeded our expectations and those of most analysts and economists. Although…
This week, the South African economy surprised with a shock decline in GDP of 0.3% for the third quarter. The numbers contradicted economists’ forecasts that GDP would expand by around 0.4% for the period, with the expectation that lower energy prices, a prolonged pause on load-shedding, and confidence in the Government of National Unity (GNU)…
The S&P 500 powered to its 52nd record high of 2024 this week, indicating that the year may end on a really strong note. The index has returned around 26% in dollar terms for the year-to-date, giving investors every reason to smile. Yet, the extent of the strong bull run from October 2022 into 2024…
Many phenomena, including test scores, height, and long-term daily temperatures follow what statisticians call a normal distribution. Plotted on a graph, the values resemble a bell-shaped curve where most data points cluster around the average (mean) and the probabilities of extreme outliers become very insignificant as one moves further from the mean. But, in a…
The USDZAR exchange rate has been a very informative instrument through which to view major political events that have unfolded in our country over the last 20 years. Knowledge of the fair value estimate, awareness of the mean-reversion characteristics of the fair value residual, and the ability to decompose the residual into an Emerging Market…
A perfect storm rained on the South African rand’s parade this week, with the local currency weakening by 3.2% against the dollar since Monday and 5% since last Thursday. This is after holding up reasonably well against a surging dollar in the first two days after Donald Trump was named President-Elect in the US. With…
This week turned out to be exceptionally rewarding for gamblers and traders who bet on Donald Trump. In line with bookmakers’ odds and predictive markets – the probability of a Trump victory on Polymarket was 65% as mentioned in last week’s News Flash. Contrary to polls showing a close race for the presidency, Trump comfortably…
As we noted in our January opinion piece titled the year of the voter, 2024 was being billed as the biggest election year in history with dozens of countries representing around 4 billion people expected to hold general or presidential elections. However, no other election will be as consequential for investors and the world economy…
As a recent article in The Economist points out, America remains an economic powerhouse with performance that readily outperforms every other major economy in the world. Since 1990, the US economy has grown from two-fifths of the GDP of the G7 nations to half. Output per person is some 30% higher than in Western Europe and…
Earlier this week, Daron Acemoğlu and Simon Johnson, both from the Massachusetts Institute of Technology (MIT), together with James A Robinson from the University of Chicago were awarded the 2024 Nobel Memorial Prize in economics. They were rewarded for their exploration of the connection between a country’s societal institutions and economic development. The theory that…
The third quarter of 2024 might have been good for equities, but it was less so for the US dollar. The US dollar index (DXY) dropped around 4.8% against a basket of currencies, turning in its worst quarterly performance in nearly two years. According to Reuters, Commodity Futures Trading Commission data indicates that net bets…
With global equity markets at record highs, advisors and investors can be justifiably concerned as to the timing of committing large sums of money to this asset class. In this article, we have researched the data of global equities performances over the past 30 years, using the MSCI World as a proxy, and using multiple…
The following article was commissioned by Dynasty for our clients and compiled by our research partner, Analytics Consulting, as represented on our Investment Committee. Since South Africa went to the polls on 29 May of this year, the USD/ZAR exchange rate has moved from a level of R18.40/$ on that day to a level of…
It has certainly been an action-packed quarter for the markets, spanning a correction for tech stocks at the end of July and into the flash crash in early August, and then a strong recovery in August and again in September. Overall, investors have every reason to be pleased with where the three months to 30…
Following the formation of the Government of National Unit (GNU) in June of this year, South Africa’s markets and economy appear to be enjoying a new era of positivity highlighted by an event earlier this week where business and government joined hands to launch ‘phase 2’ of a compact they launched last year. Business leaders…
This has been a relatively action-packed week on the geopolitical front, with Israel stepping up its airstrikes against Hezbollah targets in Lebanon, Russia’s President Vladimir Putin rattling his nuclear sabre and China test-firing an intercontinental ballistic missile into the Pacific Ocean. As these developments show, we are living in an era of heightened geopolitical tension,…
After months of speculation about the size and timing of the first interest rate cut in the US, the Federal Reserve slashed the rate by 50bps this week. Rather than regarding it as a sign of the Fed panicking about the state of the economy, most observers see it as an attempt to ensure a…
With wars raging in Ukraine and the Middle East, new powers such as China and India asserting themselves, and the economic rise of the global south, the geopolitical environment is in flux. Political developments in the US, as the world’s hegemon, will have an outsized effect on global politics and, consequently, the world economy. Decisions…
After months of debate and anticipation about when the Fed will cut interest rates, investors have locked in September 18 as the date we’ll see interest rates drop for the first time since 2020. The discussion is no longer if or when the Fed will slash rates, but by how much. A 25bps cut would…
As we have written in previous News Flashes, August has, on average, been the worst month for the stock market since 1986. With the Flash Crash that started the month, investors had every reason to fear that August 2024 would be an ‘average’ month by that measure. Yet, as markets close for the month, most…
The “hype cycle” is a term popularised by Gartner – a research firm listed on the S&P 500 – and one that is common knowledge in Silicon Valley. Since the launch of ChatGPT in late 2022, excitement about the potential of artificial intelligence (AI) has helped to power the S&P 500 and Nasdaq indices to…
Global equities markets continued their dramatic recovery this week following the Flash Crash that troughed on Monday, August 5th. The S&P 500 and Nasdaq Composite indices have now notched up sufficient gains to erase the losses recorded during the beginning of August. It is interesting that the confluence of negative factors that caused the sharp…
The equities sell-off that was sparked on Thursday last week, ignited on Monday with Asian markets plummeting at the start of trade. Japan’s Nikkei Index dropped by more than 12% on the day in a plunge reminiscent of Black Monday in 1987. Key indices across Europe and Asia followed the Nikkei down as did the…
The fear factor impacted markets this week, with a robust rally on Wednesday giving way to a sharp drop on Thursday across major indices, with a downward slope continuing today. Fears of a recession have resurfaced, with some investors questioning whether the Fed is going to be too late with an interest rate cut to…
As we noted in our News Flash last week, there are signs of a rotation underway as investors start to switch into small caps and industry sectors that have underperformed in 2023 and 2024. The Magnificent Seven stocks that have outperformed during this time came under immense pressure this week, leading to the S&P 500…
With recent US inflation data surpassing expectations and increasing the probability that the Fed may cut interest rates in September; we are starting to see some signs of a different appetite for risk over the past week. As examples, the Dow Jones Industrial and Russell 2000 indices have both substantially outperformed the S&P 500 and…
Investors have reason to be pleased with the market performance in the second quarter of 2024, with even a delay in the start of the Fed’s interest rate loosening cycle failing to dampen performance. After a robust first quarter followed by April’s relatively sharp correction, May and June saw a resumption of the upward trajectory…
As we enter the second half of the year, the world’s attention is turning to the blockbuster event of the political calendar: the US presidential election in November. Judging from previous election years, we can expect volatility to increase as investors and traders try to predict who the winner will be and what impact their…
A question that clients often ask us is how much of a risk the high levels of sovereign indebtedness in the US pose to the global economy and markets. With close to $35 trillion in national debt and a debt to GDP ratio of around 123%, the US government’s debt situation is serious enough to…
The following article authored by esteemed political analyst RW Johnson, provides his most interesting insights into the “bad faith” bargaining that occurred in the lead-up to the GNU; the ANC’s determination to exclude the DA from any key posts in the national economic cluster; a possible scenario in which the EFF and MKP may reunite…
As speculation continues to mount about whether Joe Biden will drop out of the US presidential race, we are seeing the markets start to position for a potential win for Donald Trump later this year. Movement in the markets offers a preview of what may lie ahead in the event that Trump returns to the…
With global inflation returning to normal ranges – albeit slightly slower than anticipated a year or even six months ago – some economists are questioning whether investors should still be ready for an aftershock in the form of wage-fuelled inflation. This seems like a reasonable concern, given how resilient the US labour market has proven…
The outcome of South Africa’s elections on May 29 was, as we noted in our newsletter last week, an unexpected but most positive turn of events. Although in the weeks ahead of the election, markets were not accounting for a worst-case scenario with a coalition between the ANC and populist parties, they were also not…
The Democratic Alliance (DA) and African National Congress (ANC) signed off a historic agreement to form a government of national unity (GNU) just as South Africa’s new cohort of parliamentarians took their oath in Cape Town. The development brings to fruition what we, a few weeks ago, outlined as one of the less likely but…
A trio of election results this past week serves to highlight just how inaccurate markets can be in anticipating and pricing political risks, especially in emerging markets. Investors and analysts were caught somewhat off guard by unexpected outcomes from polls in India, Mexico, and South Africa. In India, stocks and the rupee dropped sharply as…
Over the past two years, the impact of interest rates on the US economy is a subject we have returned to multiple times in our newsletters. The conventional wisdom is that higher interest rates – which remain elevated in the wake of inflation – should dampen economic growth and equity markets. Following this reasoning, we…
Rhyme-as-reason is a cognitive bias where humans are more likely to retain and believe advice phrased as a rhyme. Think of the harmless saying: “An apple a day keeps the doctor away.” Or, in the investment world, the adage: “Sell in May and go away, don’t come back until St Leger’s Day.” After the S&P…
With less than two weeks to go before South Africa goes to the polls, the African National Congress (ANC) is pulling out all the stops to secure an outright majority in Parliament. The ruling party has somehow managed to dispel some of the negativity about corruption, unemployment, slow growth, and load shedding ahead of the…
Over the past two weeks, several large foreign investors have announced plans to abandon or cut back their investments in the South African economy. Oil major, Shell, plans to exit its investment in its South African downstream assets, including its 700 fuel station forecourts, while BNP Paribas plans to exit its South African corporate banking…
Last year, Tesla was riding high as a member of the Magnificent Seven Big Tech stocks that fueled stock market gains throughout the year. This year, the pioneering electric carmaker’s stock price has tumbled 27.6% in the wake of weaker demand for electric vehicles (EVs), making it the weakest performer among the Magnificent Seven. Tesla…
Over the past decade or so, we have seen geopolitical tensions start to flare up again, following the relative stability from the end of the Cold War in 1991 marked by the dissolution of the Soviet Union. More recent landmark events have included the Crimean crisis of 2014 and heightened trade friction between the US…
Following the barnstorming performance of global equities markets in 2023, the bull run continued throughout the first quarter of this year. Investors have embraced global returns, with the S&P 500 ending Q1 2024 up 10.56%, and the MSCI World gaining just over 9%. Markets remained buoyant on expectations that a soft landing lay ahead for…
For many years we have been consistent in our belief that offshore investments offer a far better set of opportunities for our South African-based investors than local options. At the same time, some of our domestic investors may need to protect themselves against the volatility that the local currency and the global equity markets may…
Close to a year has passed since the rand tested new record lows in the wake of the Lady R debacle. With general elections just around the corner and markets widely expecting the US Fed to start cutting interest rates later this year, now is an opportune time to take stock of the rand’s direction.…
The following article was commissioned by Dynasty for our clients and compiled by our research partner, Analytics Consulting, as represented on our Investment Committee. Notwithstanding the Decoder methodology outlined below, Dynasty considers other non-quantitative factors in determining an investment case for gold, which are currently supportive of this asset class/currency. These include an apparent weaponisation…
History abounds with kingmakers – figures who didn’t have the outright power to take the crown for themselves – yet had the clout to determine who would wear it next. With the ANC’s hegemony slipping away, South African politics is likely to create new openings for smaller political parties to pull the strings after the…
Last year, a supergroup called The Magnificent Seven stormed the stock market and accounted for an outsized portion of returns. This year, the band of seven Big Tech stocks— Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — has broken up. Alphabet, Apple, and Tesla are no longer top of the pops. In fact, Telsa…
Events in Asian currency markets this week illustrate why, in our view, the US dollar remains king of currencies, even with forecasts for the Fed to start cutting interest rates later this year. The Japanese yen slid to a 34-year low at near 152 per dollar, triggering an emergency meeting of Japan’s monetary authorities. Government,…
In recent months, we have spoken about the concentration risks associated with the disproportionate weighting of the Magnificent Seven Big Tech stocks in the S&P 500 index. This week, a mailer from Coronation to its clients highlights how the outperformance of the Magnificent Seven since 2023 has resulted in a “bifurcation” of global equities markets.…
Throughout 2023, it was the momentum of the Magnificent 7 that drove US equity market returns, with an equal dollar-weighted return of 107%. The seven Big Tech companies – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – powered ahead to account for 28% of the S&P 500 index by the end of the year.…
The world we live in would be markedly different without life sciences inventions and discoveries such as vaccines, antibiotics, and the contraceptive pill, to name just a few. The latest addition to the list is a category of drugs called GLP-1 agonists, which were initially developed as a treatment for diabetes. In addition to helping…
Ever since passive investing vehicles started to gain traction with their share of the US domestic equity fund market overtaking active funds in or around August 2018 – some fund managers and analysts have suggested that active funds are about to come into their own again. BlackRock, the world’s largest asset manager, just this week…
South Africa’s Finance Minister Enoch Godongwana this week presented a Budget that was uninspiring and unremarkable, apart from the announcement of government’s decision to tap into the Gold and Foreign Exchange Contingency Reserve Account (GFECRA). The GFECRA reflects movements in the value of the Reserve Bank’s stock of gold, foreign exchange, and forwards or swaps…
Markets briefly fell on Tuesday with the news that consumer prices in the US rose by a higher-than-hoped-for 3.1% for the twelve months to the end of January. But, by the end of the week, the S&P 500 had powered back to record highs. The rapid retracing of the value equities had lost earlier this…
Following a blockbuster gain of 26% in 2023, the S&P 500 has continued its winning streak in 2024. The index briefly powered to a new record high of 5,000 points on Thursday this week. Markets ignored cautious noises from the Fed about its timetable for interest rate cuts, relishing good earnings from companies in sectors…
2024 got off to a bad start for an estimated 82,300 US workers who were laid off when they returned to work after the festive season, according to data from Challenger, Gray & Christmas. Just a few examples of the companies across industries that downsized their workforces include the likes of American Airlines, Amazon, eBay,…
Janus, the Roman god that gives January its time, has two faces: One looking back into the old year, one looking forward into the next. Likewise, this is the season when asset managers, economists, and analysts gaze back at market performance for the previous year and make their predictions about what the upcoming year will…
The 2024 presidential race in the US kicked off in earnest this week, with Donald Trump trouncing his rivals in the Iowa primary. Iowa may be small and only one of 50 states in the US, but Trump’s margin of victory suggests he is still the favourite to be the Republican Party’s presidential candidate. Given…
2024 is being billed as the biggest election year in history, with dozens of countries representing around 4 billion people expected to hold general or presidential elections. The unpredictability of election outcomes in some of the world’s most populous and economically significant nations has introduced major concerns to investors which are likely to escalate throughout…
In our first newsletter of 2023, we set out our expectation for “markets to grind higher during 2023 and recover a meaningful portion of 2022’s losses”. This forecast turned out to be accurate, with equities rallying strongly in response to signs that global inflation had abated and that the interest rate tightening cycle had reached its…
Since the Global Financial Crisis, investors have become accustomed to keeping cash in US dollars, British pounds or euros, earning minimal or zero interest while simultaneously incurring administration fees. But following the global interest rate tightening cycle over 2022 and 2023, investors can once again start earning more attractive interest rates on their funds in…
While the rhetoric around prescribed assets subsided a few years ago due to the workers’ unions realising that their members would be among those most prejudiced should the policy be implemented, there have been some queries as to what lengths the South African government may go to in order to fund their budget deficit and…
Markets look set to end 2023 on a high note, with the Federal Reserve giving its strongest signal to date that the end of the current interest rate tightening cycle is now in sight. Practically every asset class—including equities and corporate bonds—surged yesterday after the Fed indicated that it is projecting more aggressive interest rate…
India’s stock market topped a total valuation of $4 trillion for the first time on Tuesday this week—on the same day that Moody’s downgraded the outlook for China’s sovereign credit rating. Data released this week also shows that institutional investors have pulled out over $31 billion in stocks and bonds from the Chinese financial system…
Global inflation has been the major theme of the post-COVID-19 years, stoked by supply chain disruptions, high energy prices, and robust consumer spending. Some corporations have been able to bolster margins over the past three years, thanks to consumers building up their cash reserves during the times of lockdown and government stimulus. But, as inflation…
The presidential election in Argentina and the general election in the Netherlands this week both delivered unexpected results that caution investors to expect a volatile ride next year. In Argentina, libertarian candidate, Javier Milei, caused a major upset by securing 56% of the vote to win his country’s presidency. He rode into power on a…
Howard Marks, the legendary investor, wrote that investment markets swing between euphoria and depression and between celebrating positive developments and obsessing over negatives. We’ve experienced both sides of the pendulum this year, most recently with a strong month-to-date rally that has erased the losses of a dismal September and October for equities. At the time…
The Monkey’s Paw, an early 20th century short story by WW Jacobs about a cursed artefact that grants wishes, warns that getting what you want often comes with a price. Investors anticipating not only the end of interest rate hikes but looking ahead to central banks lowering lending rates should perhaps heed the moral of…
On the face of it, equity markets have many reasons to celebrate. More than three quarters of Fortune 500 companies that have reported earnings for the September quarter have beaten expectations, the US has delivered impressive GDP growth and inflation seems finally to be coming under control. Why, then, did the S&P 500 fall another…
The Big Five in African game animals has remained unchanged since the term was first coined—lion, leopard, rhinoceros, elephant, and African buffalo. By contrast, the big five stocks on the S&P 500 have changed dramatically over the past 20 years as the exponential growth of the technology industry has eclipsed capital-intensive industries such as oil…
With war raging in the Ukraine and conflict in Israel, we appear to be in the midst of a period of elevated geopolitical risk. As the FT points out, the World Uncertainty Index, which measures the prevalence of the word “uncertain” in analysts’ reports, has jumped significantly since 2021. The Vix index – which measures…
The Hamas incursion into Israel last weekend is by far this week’s biggest story in geopolitics, but the event has left markets outside of the Middle East largely unmoved. The Tel Aviv stock exchange index (TA-125) fell by almost 7% last Sunday following the attacks on Saturday, with the Israeli central bank resorting to unprecedented…
South Africa’s weak economy has placed National Treasury in the unenviable position of having to control a budget under deteriorating fiscal metrics. In addition, although the finance minister has suggested a curtailment of certain expenditure, he will inevitably face fierce political resistance from parties who are looking to garner votes in next year’s general election.…
One of the most important choices you can make to secure your legacy is who you appoint as the executor of your estate. This has always been a complex and sensitive decision, but the nuances have become even more intricate for families where many of the beneficiaries of the will reside (or intend residing) in…
At Dynasty, we have historically preferred to place most of our clients’ offshore investments directly with offshore funds and asset managers rather than placing these instruments on global administration platforms and, in the process, adding an extra layer of fees. But with a recent sea-change in regulations and the industry, we now feel that it…
After a positive first and second quarter which saw the S&P500 gain nearly 17%, the third quarter of 2023 reflects markets that are pricing in a different version of reality. The bullish sentiment of the first six months of the year faded in the wake of a sharply negative September, which followed a sell-off in early…
Governments around the world racked up a record $92 trillion in public debt by the end of 2022, with 3.3 billion people living in countries where interest payments are greater than their expenditure on health or education. To put it simply, many governments around the world would be declared insolvent if they were publicly traded…
Forecasts that economists, equities analysts, central banks, multilateral institutions, and diviners make about markets and economies have a tendency to cloud over in retrospect. Looking back at the predictions of some major organisations and publications made at the onset of 2023 compared to the actual outcomes year to date, confirms these outlooks are as unreliable…
Although equity markets have always been subject to equally irrational bouts of exuberance and despair, we appear to be living through especially volatile times. Since the COVID-19 lockdowns, wider participation of amateur day traders in markets has certainly added even more unpredictability to the mix. As we saw during the meme stock craze of 2021—when…
Just two weeks after de-dollarisation was high on the agenda at the BRICS conference in Johannesburg, the mighty American greenback has reminded the world that it remains its preeminent currency. Although well off its peak of October 2022, the US dollar is currently trading near a six-month high against a basket of currencies, making strong…
Like every economy around the world, China experienced a severe downturn amid the COVID-19 crisis in 2020. Unlike most other big countries, China pursued hard lockdowns well into 2022 and failed to benefit from a surge in post-pandemic consumer spending. Along with harsh, inconsistent regulation of sectors like tech, this has caused China’s economy to…
Ever since Goldman Sachs coined the BRIC acronym in 2001 (at that time, it excluded South Africa), its members have aspired to shape the club into a counterweight against Western hegemony. That aspiration took a step forward this week with the news from the BRICS Summit in Johannesburg that Argentina, Ethiopia, Iran, Saudi Arabia, Egypt…
There’s irony in the fact that the month of August is named after Augustus, who famously boasted that he found Rome a city of bricks and left it a city of marble. A month named after a Roman emperor (coincidentally, it’s the anniversary of his death on 19 August) associated with prosperity tends not to…
Company earnings reports for the second quarter (ended 30 June) continued to roll in this week, indicating the US economy is still in sound shape. Eighty percent of the S&P 500 companies that have reported earnings so far have beaten their estimates, although earnings per share (EPS) in aggregate have declined 5.2% year-on-year, the third…
Fitch, by far the smallest of the three major credit rating agencies, this week surprised the markets by downgrading US sovereign debt from the highest AAA rating to AA+. The agency cited “a steady deterioration in standards of governance” over the past two decades “that has manifested in repeated debt limit stand-offs and last-minute resolutions”…
Equities this week were mostly indifferent to the widely expected interest rate hikes from the Fed and European Central Bank (ECB). Markets also took heart from the International Monetary Fund (IMF) slightly upgrading its growth forecast for the global economy and stating that the risk of a crash landing has significantly receded. As we noted…
Following lower-than-anticipated inflation numbers from the US last week, we saw similarly encouraging inflation figures out of the UK, Australia, New Zealand and South Africa this week. UK inflation data for June reflected a higher-than-expected drop from 8.7% to 7.9%, and, earlier in the month, the euro-area reported year-over-year inflation of 5.5%, the lowest increase…
Market news this week was dominated by a strong rally across global equity markets and a weaker dollar that tumbled on the back of the latest consumer price index (CPI) numbers from the US. Headline inflation dropped to 3%, the lowest read since March 2021 and down from the four-decade high of 9.1% reached in…
For a few years Dynasty has utilised a “currency decoder” model developed by Dr Lance Vogel (a member of our investment committee), which is based on metrics such as the level of the US dollar relative to its developed market peers; how emerging market currencies are priced relative to the dollar; and what difference in…
“By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machines.” – Economist, Paul Krugman “In the UK… GDP per capita grew about 40% between 1700 and 1800. It more than doubled between 1800 and 1900. And between 1900 and 2000, it grew…
The mighty US dollar has held a central role in the world’s monetary system since the Bretton Woods Agreement in 1944 defined all other currencies in relation to the American greenback. But with the rise of China as a global superpower and growing tensions between the West and the East, together with BRICS, some commentators…
Building on their continued strong recovery in the first quarter of 2023, global equities maintained their momentum in the second quarter. The MSCI World Index climbed 7%, the S&P 500 was up 8.74% and the Nasdaq 100 rose 15.16% for the quarter – bringing total gains for first half of 2023 to 15.43% for the…
Today marks the halfway mark for 2023 and what a ride it has been for equities so far, despite persistent high inflation; ongoing rate hikes; a protracted war in the Ukraine; a banking crisis in March, which included regional banks in the US as well as the failure of Credit Suisse; and predictions about an…
Markets this week struggled to take clear direction from central banks and economic data. The Nasdaq and the S&P 500 indices slid on Wednesday as the Fed suggested that more interest rate increases might be appropriate this year, after deciding to pause the tightening cycle last week. Meanwhile, an increase in the UK’s base rate…
South Africa’s ruling party has, in recent weeks, pressed on with three pieces of divisive legislation in the face of increasingly (and unusually) vocal dissent from the business community. These new laws codify populist and impractical policies in an apparent attempt to strengthen the ruling party’s prospects during the national elections in 2024. The laws…
The current Rand/Dollar exchange rate level could be sustained if risk-on sentiment persist The Rand became massively oversold during May 2023, and substantially underperformed most other emerging market currencies. In particular, at the end of May the Rand was down by -14.3% year to date, which compares with a decline of only -0.6% for the…
Equities have enjoyed a solid start to the month, with Big Tech companies driving the gains. Growing enthusiasm about artificial intelligence (AI) is one of the forces powering the surge in stocks of the trillion-dollar club, which comprises Apple, Microsoft, Alphabet and Amazon. (We have exposure to all of these stocks through our offshore house-view…
At the outset of this year, we wrote an article about why we’re not bullish about the JSE, despite its outperformance of the global markets in 2022. In line with our expectations, we have seen a reversal of fortunes between major international indices and the local bourse this year. If anything, the tide has turned…
The South African rand has tumbled to new lows against the US dollar and other major currencies this week, with the R20/$ resistance level in clear sight. The rand shed around 2% of its value yesterday as the South African Reserve Bank (SARB) announced a widely expected 50bps increase in the repo rate—a move that…
In what has become as much of an American tradition as the Superbowl, the White House and Congress are currently wrangling about whether they should allow the US government to borrow more money. The US has been operating on an annual deficit for most years since 2001 and now – once again – needs to…
The rand hasn’t had an easy time in 2023, coming under pressure from record levels of load shedding, the Financial Action Task Force grey-listing, and rising interest rates in the rest of the world. But this week has been especially tough for the currency after US Ambassador Reuben Brigety accused the South African government of…
Artificial intelligence (AI) isn’t new—the technology sector has been working on it for many years and many of us interact with AI-powered virtual assistants and chatbots like Siri or Alexa every day. But this year, we’re seeing the potential of AI become real as big tech companies and startups race to position themselves at the…
(The following article has been compiled on a bespoke basis by our associate tax expert, Robyn Rogers, for Dynasty clients) Much has already been written about the surprise change by SARS to the process to transfer funds abroad. This article has been written to provide more detail on the specific requirements under the new process…
Listed property, particularly commercial real estate investment trusts (REITS), has not been the same since the start of the pandemic. While some workers have been called back to the office, many organisations are committed to hybrid and remote work as a permanent part of their business models … meaning that demand for commercial property will…
In anticipation that the peak in the rate-hiking cycle should imminently be reached in the US, the S&P 500 continued its positive run this week, with this index now having rebounded by around 7% since the collapse of Silicon Valley Bank and Signature Bank last month. The March inflation numbers released on Wednesday reinforced the view…
With higher interest rates and tighter monetary policy dampening confidence throughout 2022, major indices ended a turbulent year in negative territory, despite the fact that markets bounced back strongly in the fourth quarter. That recovery has continued into the first quarter of 2023 with a 7.5% increase in the S&P 500, a 16.8% surge in…
March witnessed the failure of certain regional banks in the US together with the collapse of Credit Suisse and its subsequent takeover by UBS. A repeat of the 2008 Global Financial Crisis was thankfully avoided as central banks together with some large banks intervened timeously to protect depositors. However, equity investors in these banks suffered…
The gold price has gained 24% in the five months since its November lows, with central banks buying record amounts of the metal last year. Having recently returned from a global conference in Miami, George Cheveley, Ninety One’s portfolio manager and metals and mining specialist, summarises in an interesting podcast (as per link below), the…
Inexperienced investors sometimes think of stock markets as glorified casinos, where you can win big over the short-term, and lose your shirt thereafter. But this is only the case if you follow a strategy of speculating with your money rather than investing to build long-term wealth. Stock markets are not a guaranteed route to overnight…
In the wake of the banking crisis earlier this month, together with continued concerns about a recessionary environment, we’ve again seen investors behaving in ways that run contrary to expectations this week. Partly explaining this is the fact that earnings for the S&P 500 constituents remain resilient, according to Bloomberg’s consensus forward earnings forecasts. Despite…
After another week of high drama for the global banking sector, the world seems reasonably safe from a systemic crisis. Swift action from regulators – and even competing banks – in the wake of the crises at Silicon Valley Bank (SVB), First Republic Bank, Silvergate, Signature Bank and Credit Suisse has helped to restore market…
When we look back at March 2020, financial markets were gripped by Covid- induced panic. The S&P500 Index dropped by a staggering 34% within 5 weeks, registering one of the steepest and fastest falls on record. Yet by the end of the year, markets had staged a dramatic recovery even though a vaccine was not…
Markets don’t react well to mixed messages and volatility was in play this week amid a range of contradictory signals. Fed Chairman Jerome Powell failed to offer clarity about the future direction for inflation and interest rates. On Wednesday, he both scaled back signals that the Fed might hike interest rates more aggressively and indicated…
The world is in a structural state of flux at the moment—from persistent inflation in the rich world and the war in Ukraine, to South Africa’s ongoing power generation crisis. The pattern of concurrent shocks and interconnected risks we see in the global economy today is described by some as the ‘polycrisis’. Yet the leadership…
Stock markets remained volatile this week with central banks and policymakers navigating the difficult trade-offs between keeping inflation under control and preventing a severe economic downturn. In the US, markets vacillated as investors balanced robust economic indicators against fears that this same economic strength will provoke the Fed to raise interest rates higher and for…
Major currencies dropped against the US dollar this week with a red-hot job market, resilient consumer spending and persistent inflation, suggesting that the Fed will continue on its present path of hiking interest rates. Yet, this week, the Congressional Budget Office (CBO), confirmed that the US is on track to add nearly $19 trillion to…
The State of the Nation Address is an annual fixture on most countries’ political calendars, an event when the head of the state updates citizens, the legislature, and the executive about the government’s priorities for the year. It’s an opportunity to outline the regime’s progress towards its goals as well as its plans to solve…
What a great start to the year for equity investors! Combined forces such as a slowdown in the pace of rate hikes in the US; a record quantum of share buybacks; the re-opening of the Chinese economy; resilient cash-flow generation of leading quality companies for calendar year 2022, upward revisions to global GDP for 2023,…
Quality-style global equity managers typically deliver a more defensive return profile during periods of sharp market drawdowns. Quality companies are characterised as having low levels of leverage, strong balance sheets and cash flow generation, together with lower cyclicality of earnings, and, as such, our selected portfolios should have fared better than markets in general during…
Equity markets have enjoyed a strong start to the year despite a slight retracement this week, with the S&P 500 peaking last Friday 4.16% up year-to-date, and our preferred global equity funds having gained as much as 6.7% earlier this week. Looking forward, we believe that earnings will be the key market influencer for the…
With average GDP growth of around 9% between 1989 and 2022—as well as the world’s largest population—China came into its own as one of the world’s most exciting investment destinations over the past decade. Its runaway growth as the country slowly liberalised its economy and integrated it with the rest of the world, made it…
At the onset of 2022, our first Weekly News Flash was entitled “The year of the Fed”. Even though we could not have anticipated events such as the war in Ukraine and prolonged Covid-19 lockdowns in China, it was indeed the case that spiralling inflation and interest rate hikes around the world were the key…
In this recently produced video recording, Alec Hogg interviews RW Johnson on the ANC’s Elective Conference held this past December and the potential outcomes of the General Election scheduled for 2024. He also touches on Eskom, race-based legislation in SA and his outlook for the country in general. Mr Johnson is a highly regarded South-Africa…
The JSE has started 2023 on the front foot, hitting record highs on 13 January with mining stocks and Naspers/Prosus leading the gains. This follows a difficult 2022, in which the JSE ended negative in dollar terms, but nonetheless outperformed global markets. The local bourse held its own as inflationary pressures, rising interest rates and…
It would be satisfying to end the year on a positive note, as was the case last year when the S&P 500 and the FTSE/JSE gained 26.9% and 24.1%, as measured in dollars and rand, respectively. Unfortunately, this will not be the case for 2022. On the global front, this year draws to a close…
Inflation is the theme that has defined 2022, so the year draws to a close with some welcome news. This week, we saw the first signs that price pressures may be peaking with the annual US consumer price index (CPI) at 7.1% for November, the lowest since December last year, and below a reading of…
As the global community seeks to accelerate the move towards cleaner power sources, South Africa’s government is still hooked on coal. This is despite the hundreds of billions of rand South Africa has secured from rich countries to help fund its just transition towards renewable energy. Business Day carries an editorial about how government seems…
While the Fed’s announcement on Wednesday that they will be looking to raise rates by 0.5% going forward (as opposed to the last four moves of 0.75%) moved markets very positively on the day, we’ve chosen to focus on the local political story of the week, which is also making international headlines. As the independent…
Risk and uncertainty continue to characterise 2022, from both geopolitical as well as financial market perspectives. An intra-year low for the S&P 500 was reached on 12 October, while the FTSE/JSE reached its low point on 29 September. Yet from these points of pessimism, there have been encouraging announcements and data that the aggressive rate…
Billions of dollars in crypto holdings have disappeared this year in a series of business collapses. According to Bloomberg News, the combined value market capitalisation of crypto assets has fallen by an estimated 73% since peaking in November 2021, wiping out $2 trillion in value. Casualties and/or failures have included TerraUSD, Luna, Three Arrows Capital…
Yesterday, it was announced that US inflation had cooled in October by more than forecast, causing US stocks to surge the most since early 2020. On the day, the S&P 500 gained 5.5% in a euphoric reaction to the possibility that the US annual inflation rate may well have now peaked, and that the worst…
On 29 July 2022 we wrote about the fact that in these paradoxical times, bad news is good news. This theme continued in the last week as the earnings of some of the largest tech companies disappointed, which reportedly plays right into the Fed’s hands. While it’s not helpful for investors to see the earnings…
An article forwarded to us this week highlights how living standards in the UK have fallen significantly behind Western Europe and their real wages are not only lower than they were 15 years ago, but they’re likely to be even lower next year. “In the past 30 years, the British economy chose finance over industry,…
There have been several jokes lately – perhaps in the last 45 days – welcoming the UK to the Emerging Markets’ club, or even to the Fragile Five. Indeed, with inflation in double digits, their currency having lost more than 20% against the dollar since the start of the year to late September and their…
We’ve borrowed the title for our News Flash this week from the book of the same name by Dr Dan Ariely, in which he refutes the common assumption that humans behave in fundamentally rational ways – a form of behavioural economics. Traditional economics is routed in the set of simplifying assumptions which include that humans…
Global inflation and central bank responses will continue to be the dominant forces impacting financial markets. The International Monetary Fund (IMF) released their Analytic Chapters in their World Economic Outlook on 6 October, and we commissioned our associate economist, Alison Barker head of Analytics Consulting FX Solutions, to summarise her take-outs from the release. While…
Even though our clients often turn to highly-regarded specialists for help in estate planning, we regularly review wills that have overlooked some key issues. Many people also hold a range of misconceptions about estate planning. Here are 12 questions we frequently encounter when speaking to clients about their estate planning, which we think may have…
We published an article in April 2022 which highlighted why we thought that the rand was overvalued and why we believed it was at risk of a significant rerating. At the time, we noted that the rand could come under significant pressure if market volatility increased or if the commodities cycle tapered off. Since then,…
The quarter to end September has been a rollercoaster ride in a turbulent year. We saw markets ending at new lows for 2022, with the S&P 500 down 23.9% year-to-date, the MSCI World down 25.1% and the ALSI down 10.1% in rand terms and 21.6% in dollars. Let’s take a closer look at how the…
The answer to this question is addressed eloquently by Karl Leinberger, Chief Investment Officer of Coronation Fund Managers, who explains that “the human brain is hard-wired to survive physical threats, not to take advantage of a market crisis. Fear is paralysing and so investment time horizons shrink to prioritise survival now. There is a constant…
Yesterday has been called “Super Thursday,” the day central banks around the world followed in the Fed’s footsteps, hiking rates by anywhere between 0.5 and 0.75 percentage points. The aftermath has been a major sell-off in equities as well as a spike in bond yields. The Bank of England raised interest rates to 2.25% and…
Global equity markets dropped dramatically on Tuesday, following the release of the US inflation numbers for August. The 12-month inflation number came in at 8.3% (against the median estimate of 8.1%), easing from July’s annual rate of 8.5%. At first glance, these seemingly small movements in the numbers should not have caused the S&P 500…
While Europe and the UK face structural challenges and a Russia-induced energy crisis, a recently published report highlighted the stellar performance of US corporates. According to MRB Partners, profits surged in the second quarter to an all-time high relative to GDP, “underscoring the extraordinary pricing power and global prominence of US corporations. Profits have benefited…
While last week’s symposium at Jackson Hole was all about inflation, the mood of investors across the world in the aftermath of Powell’s speech, was one of deflation. The stock market rally of 17.7% that began on June 16 pivoted to recession anxiety. Market reactions were somewhat sharper than we had expected, as central bank…
The Economist recently published an article on whether unemployment really has to rise to bring down inflation. Persistently high inflation will remain unresolved as long as rapid growth in wages continues to power a spending boom. Higher wages cause embedded inflation, and this is what most troubles the Fed, and what it seeks to address…
On 13 May, in our Newsflash entitled Searching for the bear market trough, we wrote that a signal for the turning points in bear markets is typically when there is a total vacuum of optimism, and when the prevailing news is overwhelmingly pessimistic. We penned this at a time when clients and even global investment…
On Wednesday, the US released its inflation figure of 8.5% for the 12 months ending July, against the consensus expectation of 8.7%, this being the lowest year-on-year number in recent months and the first sign the Fed’s aggressive rate hiking policy may be moderating inflation. On the back of this marginal decease in the inflation…
Economists believe that people’s expectations are an important influence in their decisions, whether these be to invest in expanding a business, or to defer or accelerate purchases. Economist John Maynard Keynes labelled the role of expectations “animal spirits.” Consequently, what we think may happen in an economy in the future could determine how we act…
On Wednesday, the US Fed hiked its benchmark rate by 75 basis points for a second consecutive month. This in the face of the June inflation number, which came in at a shock 9.1% and above the consensus estimate of 8.8%. Given that GDP fell by 0.9% in the second quarter, after declining in the…
In recent months, we have often faced questions from clients around the likely duration of the currently depressed equity market conditions and what the prospects for a meaningful market recovery may be. Of course, we are not able to address these concerns with any degree of conviction. However, we have previously written about markets being…
One of our preferred global managers (Terry Smith – Fundsmith Equity Fund), wrote in an update this week on how inflation, rising interest rates and an increasingly likely recession have two obvious effects on equity investments – fundamental effects and valuation effects. He admitted that he has no insight as to the extent interest rates…
ESG stands for Environmental, Social, and Governance and, according to PWC, investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities. With Western countries having moved fast to isolate Russia in the wake of the war in Ukraine, energy security and the green economy have…
Markets have just recorded their worst quarter since the early days of the Covid-19 crisis in 2020, with the reality of persistently high inflation continuing to dictate direction. The MSCI World index dropped by 8.4% in June and 15.5% for the second quarter of 2022, while the S&P 500 fell by 8.3% in June and…
SA fundamentals are weak, but external factors will also play a role in determining the rand’s direction in the second half of 2022 The following article has been commissioned for Dynasty clients and authored by Alison Barker, economist and head of Analytics Consulting FX Solutions, this being our Investment Committee’s primary source for currency research.…
The era of low interest rates and low inflation seems to be behind us, with most investors and governments admitting that inflation is more persistent rather than being of a transitory nature, as was previously put forward. Rising fuel and energy prices, primarily as a result of the war in Ukraine, supply chain disruptions due…
The first six months of the year were the stock market’s worst half since 1970, with the S&P 500 having declined by 21% year-to-date. Bonds, which are traditionally seen to provide more stable returns, have also had a torrid year – the ten-year Treasury note having fallen 10% in price. Indeed, it appears there has…
Our first newsletter for 2022, titled The Year of the Fed, outlined why we felt the US Federal Reserve’s reactions to persistent inflation would be the key determining factor in how markets faired this year. What we didn’t know was that their job would become that much harder as inflation had another, and perhaps more…
Given this week’s blowout, where the S&P 500 sold off another 6% to the end of Thursday, we’re questioning whether the global markets are already pricing in a worst-case scenario. The US Fed adjusted its policy in raising interest rates by 0.75% on Wednesday, using the escape clause of data dependency. Equity markets first reacted…
Questions have been raised about the tech sector’s stock market dominance over the past decade and whether this is likely to continue. An article on this subject appeared in a recent edition of the Wall Street Journal. Individual tech stocks have recorded some of their sharpest falls this year, with hundreds of billions of dollars…
Have inflation and earnings forecasts in the US economy peaked? It is these twin peaks, or symbiotic key factors, that are likely to influence market direction over the coming months, as it’s still the US that pulls most of the levers on the global economy. The Fed is well on a path towards monetary tightening,…
Seasoned investors have witnessed a range of events that have surprised over the years – pandemics, natural disasters, political upheavals, wars, terrorism, financial crises… and more recently unexpected, decades-high inflation in many of the world’s largest economies. Most of these events have had a devasting effect on financial markets. In the modern era, no country…
While we have already written much about inflation this year, it seems appropriate to continue in this vein as the actions of central banks, and the consequences of market participants pre-empting or second-guessing their actions, have global equity markets on the brink of being classified as bear markets – defined as being down 20% from…
History shows that turning points in bear markets occur at the points of maximum pessimism where there is almost a vacuum of optimism. Although markets initially reacted well last week, as US Federal Reserve chairman Jerome Powell pushed back against incremental 0.75 percentage point rate increases (the actual hike was 0.5 bps), markets have since…
Smithson represents a small carve-out within the equity component of our Dynasty house-view Funds and is our only component focussed on the small and mid-cap sectors. As such, Smithson has a high beta characteristic and will tend to be much more volatile than our other fund components. We trust that you found that the presentation…
The Federal Reserve this week announced a 50 basis points increase in its rate, the first hike of this magnitude in 20 years. This move did not come as a surprise at all and was in line with many analysts’ expectations and, indeed, with the Fed’s communications. FOMC meetings are becoming a bigger event as…
We wrote in March about how the war in Ukraine could change everything. In fact, according to Professor Yuval Harari, an Israeli public intellectual and historian, what’s at stake for everyone across the globe increases as the conflict continues. More than two months into the conflict, Ukraine and Russia have not yet managed to reach…
The IMF has revised its global growth outlook for 2022 and 2023 downwards to 3.6% for both years. This is despite inflation risks falling. The question is whether we are now facing a recessionary environment. According to UBS research, there are three factors that can mitigate this risk: First, European spending firepower should limit the…
The “bullwhip effect” was coined in 1997 and refers to a phenomenon within supply chain management whereby shifts in consumer demand cause greatly exaggerated changes further up the supply chain. Inventory swings act in bigger and bigger “waves” in response to consumer demand, with the largest “waves” impacting the suppliers of raw materials – either…
Finance Minister Enoch Godongwana delivered his inaugural Budget Speech on 23 February 2022, the content of which has already been widely publicised and digested by different stakeholders. Of greater interest to us were certain Exchange Control amendments announced by the Reserve Bank after this date, which we believe to be of particular relevance to our domestic,…
With international markets facing headwinds in 2022, one would have expected the rand to be on the back foot. After all, rising interest rates in the developed world, growing inflationary pressures, “risk-off” due to the war in Ukraine, and sanctions on Russia would all seem to point to international investors gravitating towards safe haven assets.…
In one of our first communications in January, we indicated that inflation would be the big story of 2022. Even before war broke out in Ukraine, there were indications that the nature of inflation in the US and the rest of the world was shifting from transitory to persistent. And this, as we predicted, would…
As mentioned in our Market Update, the quarter was characterized by concerns around higher-than-expected inflation, a more hawkish policy response by the US Fed in terms of rate hikes, and the war in Ukraine. How have these factors impacted our portfolio positioning? Dynasty-selected portfolios that are aligned with a quality style investment philosophy, generally underperformed…
There is no doubt that the onset of the conflict in the Ukraine led to increased inflationary pressures across the globe, arguably setting the scene for a deeper drawdown on global equity markets than had been experienced up to 24 February, the date of the invasion. For example, the S&P 500 was down 12.82% on…
The Russian invasion of the Ukraine late in February started against a backdrop that was already proving to be a challenge for some regional equity markets, specifically in the US. As 2022 dawned, market participants turned their collective focus to the looming benchmark policy interest rate hikes by the US Federal Reserve in response to…
According to John Mearsheimer, a respected international relations scholar in the US, law and morals and ethics matter in the international system, except when they are in direct conflict with a nation’s own strategic interest. This with reference to an article penned by Oscar van Heerden and published by the Daily Maverick on Wednesday. Van…
“The war in Ukraine could change everything.” This is according to a TED talk by Professor Yuval Harari, an Israeli public intellectual and historian. He describes how, besides the regional and deep humanitarian crisis, so much is at stake for everyone across the globe if the conflict is not resolved soon. By “resolved” he means…
Last weekend, President Vladimir Putin ordered Russia’s nuclear forces into a higher state of alert, the first time the Kremlin has done so since the Russian Federation was established in 1991. According to Daryl Kimball, executive director of Washington-based Arms Control Association, “This is the first time in the post-Cold War era that a US…
Russia’s invasion of Ukraine, in what some fear will be Europe’s largest battle since World War II, has added volatility to markets which were already impacted by decades-high global inflation numbers, with interest rate hikes from various central banks (predominantly the US Fed) to follow during the course of the year. These combined events have…
Just how different this year is proving to investors! Most analysts expected some action on interest rates from the US Federal Reserve in 2022, but perhaps not the five rate hikes they’re now pricing in. Inflation was clearly driving upwards, but we’re seeing much higher, more consistent price increases. Since early January, many global institutional…
Key take-outs compiled by Reder van Rooyen (investment analyst at Dynasty) Metrics used in the investment process: As a precursor, the Fundsmith Equity Fund looks at the following metrics when identifying strong and resilient companies to invest in: Return on Capital Employed (ROCE), gross margins, operating profit margins, cash conversion and interest cover. As…
The book The Wisdom of Crowds by James Surowiecki refers to the idea that large groups of people are collectively smarter than individual experts when it comes to problem-solving, decision-making, innovating, and predicting. This is especially relevant as it pertains to financial markets, but there is an important caveat that participants in the crowd need…
The week was dominated by the mixed fortunes of two of the world’s largest companies, namely Meta, the holding company for Facebook, and Amazon. Facebook parent company Meta has produced less than stellar results, and – according to UBS – is the TikTok for “old people”. Its results led to a historic plunge in the…
The week kicked off with a manic Monday on Wall Street, followed by another selloff on Tuesday. The Nasdaq 100 now trades at 25 times forward earnings, down from 30 at the end of 2021. On balance, global markets have continued the week on this soft note, with the MSCI currently down 8.5% year-to-date. But…
Equity market corrections are certainly not unusual and are both more frequent and less severe than market crashes. The Nirvana, of course, is when markets move up steadily, such as the period between October 2016 and January 2018 when the S&P experienced positive returns for fifteen consecutive months, leading to a cumulative return of 36%…
A consideration expressed by almost all our domestic clients when progressing their wealth externalisation strategies, is around whether the prevailing exchange rate is at an acceptable level for currency conversion purposes. In addressing this issue, we consider many factors including the historic long-term trend line (which empirically illustrates rand depreciation of on average around 5%…
Many of our clients are aware that the Dynasty House-view Funds include a relatively minor weighting to the global small and mid-cap sector via Smithson, a listed UK-listed Investment Trust. In this five-minute video interview, Jill Carey Hall, head of small and mid-cap strategies at Bank of America, explains why stocks in this sector, particularly…
With the consumer price index in the US hitting a four-decade high in December 2021, rising 7% year-on-year, the investment conversation in 2022 will be dominated by persistent inflation and its impact on financial markets. With a collision between pandemic-related supply chain bottlenecks, labour shortages and growing demand, the US Fed is no longer talking…
As we enter a new year, it is an opportune time to reflect on the performance of the markets in 2021 and cast our eyes to the future. Looking back to the start of the previous year, we expected equity markets to deliver moderate returns; cautioned that many geopolitical risks were still in play; and…
Early last year, we published a news edition entitled “The year of the vaccine”. Our thesis was that the success (or not) of the vaccine rollouts would determine the timing and extent to which global economies would reopen and normalise. This would, in turn, have a profound impact on the sustainability of the equity market…
Last week’s introduction to our news flash concluded that “the Omicron variant does not warrant a change in our view that the global economy is on a road – albeit bumpy – to a full recovery”. As coronaviruses constantly mutate, they tend to lose their pathogenic intensity. Omicron seems to be following this path. Those…
Our header may appear presumptuous, but this week the Omicron fear factor that gripped financial markets last Thursday and Friday, appeared to have reversed as we initially witnessed rebounds in both equities and currencies, with subsequent market directionality driven primarily by a focus on the US Fed’s updated outlook. Last week’s global market declines, which…
Local investors can be forgiven for thinking the reason for accelerated rand weakness in November is primarily related to SA-specific factors. However, until yesterday, the major influencer driving even developed market currencies weaker was outright dollar strength. As of yesterday, the dollar had strengthened against the Euro by 3.52%, the British pound by 2.73%, and…
The S&P 500 Index continues to set records despite known risks, such as growth slowdowns, supply chain issues, geo-political tensions between the US and China, rate hike probabilities, and persistent inflation. This has led to the S&P 500 Index now appearing very expensive, even as measured on a forward PE metric. However, it is likely…
As the COP26 conference winds down, it has seen some interesting wins for countries in the developed markets, and saw the US and China put aside their differences long enough to agree on an accord that will help trim global pollution. The overarching goal of the conference is to put measures in place to limit…
The current debate dominating the markets, and being discussed by market watchers, is the relationship between liquidity and growth. The question being asked is what markets would look like without the assistance that has helped plump up economies. Stimulus, if you will, is now starting to get cut back. Some argue that, as liquidity is…
By October month-end last year, global markets were facing massive risks to sustained recovery prospects. The looming US election was turning ugly, while there were still major concerns over the success of the Covid vaccine trials. As we stand one year later, the MSCI is up 39% as measured in dollars, this being significantly higher…
The primary economic talking point for the financial markets this week is whether global inflationary pressures will prove transitory or persistent and how central banks will respond. This has been a recurring theme over the past few months, one that we have touched on several times in our weekly news flashes. The impact for currencies…
During hard lockdowns implemented to curb the spread of the coronavirus, supply of some key items was severely restricted. Well after initial panic buying caused a shortage of essential household items in several markets, some continue to be severely impacted by other shortages as the global economy re-opens. The ongoing supply shortage of semi-conductors making…
The volatile trading during much of September has continued into October, with markets seemingly unable to pick a particular direction. According to Bloomberg, the S&P 500 alternated between gains and losses of at least 1% for four straight sessions this week – the longest stretch since June 2020. Ten-year Treasury yields, too, are swinging wildly.…
Global markets were volatile for much of September – and the last week of the month in particular. The instability was enough to erase the strong gains made in the first two months of the quarter (Q3), leaving global equities flat to slightly down for the three-month period. It is important to place this disappointing…
Two prominent South Africans have spoken out against the morass of corruption, poor economic policy, and mismanagement in which the country finds itself under ANC governance. Billionaire, Rob Hersov, and Frans Cronje, director at the Centre for Risk Analysis, have both hit out at policies such as expropriation without compensation (EWC) and outlined why they…
Given South Africa’s volatile currency and the fact that our economy represents less than half a percent of world GDP, astute investors will usually seek exposure to other territories. This enables them to mitigate local risks and take advantage of a wider set of global opportunities and hard currencies. The case is, however, sometimes made…
Debt woes at Chinese property developer, Evergrande, sent markets into a spin earlier this week, with investors questioning whether the company would default on $119 million in interest payments due on its bonds. Founded to capitalise on China’s ascending middle class and booming economy, the company is fuelled by $300 billion in debt and is…
With inflation worries on the horizon internationally and locally, many are concerned that this could adversely affect economic growth and corporate earnings, which have just started to recover from the extreme downside caused by the global coronavirus pandemic. As inflation increases, central banks are tapering off stimulus packages, and need to do so in a…
The rand was surprisingly strong this week, gaining 2.3% against the dollar. What is unusual is that it achieved this in the midst of a stronger dollar and slightly softer global equity markets. Ordinarily global risk-on sentiment leads to a weaker dollar, rising global equity markets, and stronger emerging market currencies. At the moment, the…
International markets seem set on strong growth, with the S&P 500 closing several days at new highs. The S&P hit its 50th all-time high on 24 August 2021, placing it 20% up for the year to date. It seems this market is pricing in job gains with the US probably having added 725,000 jobs in…
Covid-19 has catalysed an innovation culture with many new software applications, security solutions, devices, and ways of working coming out of people’s need to hunker down at home while carrying on with their day-to-day jobs. An explosion in small business registrations and start-up activity bodes well, since small enterprises drive economic growth. According to the…
South Africa’s Department of Social Security raised eyebrows this week by proposing a comprehensive overhaul of the social security system that could significantly increase the tax burden for most taxpayers. This comes at a time when government has broken the social contract through its inability to rein in corruption and deliver efficient, quality social services…
The market is closely watching US inflation, which was in line with July expectations after dramatically exceeding them in June. For much of the year, investors have been concerned that inflation, which is generally linked to growth, could spike – leading to a drastic, market-shaking change in monetary policy and that the US Federal Reserve…
This week’s edition focuses on the global airline industry, as its operational status serves as a primary indicator of whether the global economy is truly open, or not. On the home front, the major development was President Ramaphosa’s announcement last night of a Cabinet reshuffle. Our analysis is summarised in terms of positives and negatives…
Chinese tech giants lost hundreds of billions of dollars in market capitalisation early this week as the government widened its crackdown on the sector – a move that has unnerved international investors who remember how Beijing last year put the brakes on the planned initial public offering (IPO) for Ant, one of the country’s largest…
An article in the New York Times this week asks whether the US economy is running too hot or too cold as it reboots in the wake of Covid-19. Although the economy is alive with possibilities, inflation is outstripping pay gains for many workers, with the number of those employed far below pre-pandemic levels. Both…
As predicted at the beginning of July, former President Jacob Zuma’s incarceration has unleashed waves of violence that have contributed to government uncertainty and policy volatility. It is no exaggeration to describe all of this as an insurrection – an attempt to create chaos to achieve political purposes, namely the early release of Zuma and…
The biggest news of the week for our South African clients was undoubtedly the fact that the country’s former President, Jacob Zuma, handed himself over to police to begin his 15-month incarceration for contempt of court just before midnight on Wednesday, 7 July. Zuma, who was found guilty of contempt of court for refusing to…
An introduction by Dynasty Founder, Barry Dubb: The Constitutional Court ruling sentencing former President Zuma to 15 months in jail will probably only result in him sitting for 4 months with parole for good behaviour. On the one hand, the assertion of: the rule of law in the judgement; the principle of equality before the law;…
Retail investors’ interest in cryptocurrencies has again exploded over the past year, with Bitcoin’s rollercoaster ride during this period prompting many to ask what role digital currencies may play in the future. Some of our clients are curious about whether cryptos will one day evolve into a viable alternative to fiat currencies or to inflation-hedge…
Despite patches of volatility in the global markets, we have ended the second quarter on a high note for global equities. Yet there is a sense that we are reaching an important inflection point as the US economy continues to recover at a blistering pace, with a successful mass vaccination programme allowing for the rapid…
In April 2020, the rand touched lows of R19.34 to the US dollar in the wake of the beginning of the Covid-19 crisis and a decision from Moody’s to downgrade South Africa’s sovereign credit rating in the first quarter of the year. At that time, we published an article about why the rand was likely…
Powered by consumers with extra savings, businesses eager to hire and enormous policy support, the United States’ current economic recovery is billed as being “unlike any in recent history”. According to the Wall Street Journal, businesses and workers are expected to emerge from the downturn with far less permanent damage than occurred after recent recessions,…
According to new research from Bloomberg Economics, a housing bubble is starting to form in many countries worldwide as they ease themselves out of the Covid-19 crisis. The research indicates that New Zealand, Canada and Sweden are the frothiest housing markets, with the UK and the US also ranking high in risk. Bloomberg Economics uses a…
In recent News Flash editions, we have written about the “K-shaped” economic recovery, while today we focus on the sustainability thereof, as well as how governments intend using taxes as an instrument to plug their deficits. New research from Stanlib highlights just how badly the pandemic battered the world economy in 2020, while offering hope…
Following the worldwide loss of 255 million full-time jobs in 2020 — four times more than during the global financial crisis — the International Labour Organization (ILO) warns that we could see a loss of a further 36 million to 130 million jobs worldwide this year. The ILO says that this pain will be unevenly…
Amazon this week announced plans to acquire MGM in a transaction worth $8.45 billion – a deal that encapsulates some of the biggest trends of our time, including the convergence of big tech and entertainment and the way in which the pandemic has accelerated digital adoption. The acquisition is Amazon’s second largest after its $13.7…
The International Energy Agency has signalled that for the world to limit global warming and get to net zero emissions by 2050, all new fossil fuel investments – oil, coal and gas – must come to an end. This news might add even more momentum to the trend we’re seeing of financial institutions backing away…
Despite growing worries about post-pandemic inflation and the danger of a bubble, stock markets appear impervious to warnings from the sceptics. Where it was the technology and home entertainment sectors that surged during last year’s lockdowns, investors are now betting on cyclicals, commodities and banking to boom in a turbo-charged economic recovery. Government and central…
During the 1980s, the US lived through Reaganomics, an economic philosophy rooted in a steadfast belief in deregulation, lower taxes on businesses and the wealthy, and less federal government spending. Now, as America starts to emerge from the pandemic, we’re seeing its almost-exact opposite on the ascent: Bidenomics. The term refers to President Joe Biden’s…
One of the questions policymakers and analysts are beginning to grapple with post-pandemic is the potential impact of Covid on birth rates in a world where many rich countries are already seeing population decline. Business Insider reports that women are taking a ‘rain check’ on babies, due to both economic distress as well as their…
In August 2020, we postulated as to whether the recovery of the world economy would take the shape of a V- or a U- or an L. What we are seeing emerge instead is a K-shape recovery, where different parts of the economy and different countries recover at different rates and in different magnitudes. A…
The world economy is showing surprising resilience in the wake of the pandemic, boosted by fiscal stimulus and low interest rates. Several large economies have reported higher than expected GDP growth for the first quarter of this year. Year-on-year, China’s economy grew by a record 18.3% in the first quarter, while US output in the…
Despite a bit of a rollercoaster ride for big tech shares in the first quarter of 2021, the global equity markets were robust during the quarter ended 31 March 2021. The question on everyone’s lips is how much longer the markets can show such resilience and what changes we can expect to see as vaccine…
‘Responsible investing’ is becoming a mainstream movement, with more institutions evaluating Environmental, Social, and Governance (ESG) criteria when they screen potential investments. This is a development we are watching with great interest at Dynasty and it is a trend that we broadly support. But before we look at the pros and cons of ESG, let’s…
We have many clients in South Africa who are content with their lifestyle and have no plans to move abroad any time soon. They enjoy the weather, have close family ties in the country, and believe that they can sustain their way of life into retirement and beyond. The question that many of them ask…
As factional politics in the ANC comes to a head, it is obvious to state that there will be winners and losers. The $64 000 question is: Who will win and by how much? In this high stakes contest, the policy and future prospects of South Africa depend on the outcome. Politics, not economics, is the…
US President Biden has set out the first part of a grand infrastructure and jobs proposal, which will see $2 trillion ploughed into America’s infrastructure and its shift to greener energy. The White House plans to pay for the proposal by raising corporate taxes and eliminating tax breaks for fossil fuels. The massive spending on…
Generous central bank and government stimulus programmes have helped to keep the world economy and equity markets afloat since the start of the pandemic. As vaccination drives accelerate across the globe, economists and analysts are speculating about what will happen when these programmes run to an end. Equity markets in China offer us some insight,…
Fund managers around the world are scrutinising human rights and environmental concerns in their investment decisions. BlackRock—which last year committed to selling stakes in fossil fuel companies—has signalled that it now plans to press companies about their policies related to human rights, as well as biodiversity, deforestation and water. Economists forecast that a failure to…
Australian virologist and Nobel prize winner Sir Frank Macfarlane Burnet declared in 1962 that one of the most important revolutions in history was the “virtual elimination of social diseases”. After all, within two decades, smallpox and polio would be eliminated from most advanced nations. Yet, according to the Financial Times, Burnett had not fully considered…
Economists and analysts have, from early in 2021, signalled the danger that stock markets may face a ‘taper tantrum’ this year – in other words, a surge in US treasury yields in response to an indication that the Fed may begin tapering quantitative easing, despite the Fed’s continued reassurances to the contrary. The fear is…
Despite steep losses in US stocks on Wednesday and Thursday, much of the narrative this week focused on how the world economy will move beyond the pandemic into recovery. With more than 225 million vaccine doses already administered across 100 countries (according to Bloomberg) – and an accelerated pace of inoculation – hopes are rising that the worst of the…
Bitcoin again captured news headlines as the cryptocurrency surpassed the $54 000 level on Friday. The currency has moved more mainstream with companies such as Tesla and MicroStrategy having recently acquired/added to their holdings, and PayPal allowing 346 million users to buy and spend Bitcoin on their platform. But the explosive rise in the Bitcoin…
This week’s News Flash does not include much on current affairs, focusing instead on the highly topical and contentious subject of taxing wealthy individuals. As we show in our headline article for the week, a wealth tax is not a new (nor a necessarily good) idea, but it is one that has gained traction in…
Given South Africa’s structural inequalities, historic injustices and high poverty, taxing the rich to uplift the poor is an idea that resonates with many stakeholders in our society. It’s thus unsurprising that the debate about whether the government should introduce a wealth tax has flared up again at a time when there’s an urgent need…
At current levels, the Rand provides a good opportunity for externalising funds The Rand exchange rate appears to be benefiting from a rare range of positives that are likely to continue over the next 3-6 months. Importantly, this does not mean that Rand is expected to strengthen substantially further in the weeks ahead, but it…
Whilst 2020 will undoubtedly go down in history as the year of the Covid-19 pandemic, we suggest that 2021 will be the year of the vaccine. This week’s news covers articles on the unprecedented and sheer logistical scale of the global vaccine roll out. Yet poorer emerging markets are likely to lag behind their wealthier…
“Trilemma” is a term in decision-making theory. Unlike a dilemma, which has two solutions, a trilemma offers three equal solutions to a complex problem. However, the options of a trilemma are conflictual because of mutual exclusivity, which makes only one option of the trilemma achievable at a given time. From an investment perspective, there is…
The polarisation of Americans by an autocratic leadership and a lack of bipartisan politics will be one of the most unfortunate, enduring legacies of the Trump presidency. Newly elected President Biden’s inauguration speech on Wednesday was underlined by a call for unity, in that to restore the soul and secure the future of America, this…
Last week we published our newsletter for the final quarter of 2020. In this first weekly version for 2021, we look at some of the ironic parallels between US politics over the last few months, especially the last two weeks, and of those traditionally closer to home. Indeed, the failure of political systems is most…
As we enter 2021, it is worth reflecting on our expectations at the beginning of 2020 when facemasks, social distancing, and national lockdowns were not yet a part of our day-to-day lives. At the time we were expecting moderate growth and a possible market correction but were also reasonably confident that a global recession was…
Investors often seek our advice as to which currency/currencies we would recommend for their offshore investments and why. Given how many funds are run from the UK and the Channel Islands, it’s a question that has come up more often since the Brexit vote sent the pound tumbling in 2016, and more recently in 2020…
Over the years, clients have sought advice about structured products, especially at times when the markets are in turmoil or when they are concerned about downside risk in equities markets. Such products, also known as structured notes, are vehicles that offer a guaranteed return on investment, within certain parameters. These products are generally packaged by…
One of the most misunderstood areas of taxation among higher net worth South African investors is the implications of holding a high-value portfolio of shares in an offshore jurisdiction. Many wealthy investors have sizeable global share portfolios with banks in Switzerland, the Channel Islands, and other parts of the world. They have established these relationships…
As we approach the end of a tumultuous year, there is a major disconnect between portfolio growth and the lasting hardship that has been inflicted on the global economy and society as a whole. Year-to-date the MSCI was up 15.78% on Thursday, gold was up 24%, and Bitcoin was up 218%, all as measured in…
This week was characterised by a slew of legal and regulatory actions against a few of the globe’s largest media and digital platforms, namely Facebook and Google. This is on the back of recent fines against Amazon, as well as the State of California’s decision against Tesla in May, which prevented the manufacturing plant from…
By late October, there was ample evidence that the global Covid infection rate was spinning out of control. Equity markets were weaker, down a second consecutive month, while the upcoming US election was dividing the country’s population like never before. However global traders betting on a continued slump absorbed a $163bn loss in November, adding…
This year has been characterised by immense duality: The record velocity at which markets declined and then recovered; despair and hope; growing income disparity; stimulus on/stimulus off; and investor sentiment around increased Covid-19 infections versus positive vaccine developments. As we transition into 2021, such duality may continue as ‘‘traditional’’ industries begin to shift to pre-pandemic…
In our July article entitled “Equity Market Direction – Will it be the ‘P’ or the ‘E’?” we wrote about the well-known fact that corporate earnings (E) are a very influential driver of share prices (P) over the long-term. To quote US-based investment advisory firm, Fisher Investments: “With two companies now reporting positive advanced trial…
In his song, Thuma Mina, late South African jazz musician Hugh Masekela anticipated a day of renewal, of new beginnings. The translation of Thuma Mina – “send me” – was the mantra that newly elected President, Cyril Ramaphosa, built on in his State of the Nation speech on 16 February 2018, which drew on the…
At the time of writing, it still remains to be seen as to who will win the United States election. In the midst of the process, the temperature of the nation has become feverish with protests ranging from the electoral system itself to the validity of mail votes and late counting. Meanwhile, the incumbent president has…
While second waves of the Covid-19 virus are causing a major upheaval in some key developed markets this week, the biggest news item and risk to global stability is still next week’s US Presidential Election. I recall the French president, in the early to mid-2000s, saying that the US election was too important to the…
In last week’s News Flash entitled ‘‘Money doesn’t grow on trees’’, we highlighted that the most substantial and enduring impact of Covid-19 will be the dramatically increased level of debt on almost all global government balance sheets. As a logical sequel, this week’s quote relates to the extraordinary level of money-printing by central banks. On the…
On predicting uncertainty “We have in economics adopted an approach to thinking about uncertainty which assumes you can attach probabilities to more or less every conceivable event and that choice under uncertainty framework has dominated economics for 50 years … and that is simply not how people either could or do think about uncertainty.” On…
Perhaps the most substantial and most enduring impact of Covid-19 will be the dramatically increased levels of debt on almost all global government balance sheets. The economic impact of the pandemic has severely affected both the income and expenditure sides of the fiscal equilibria – as tax revenues plummet due to decreased economic activity and…
As the globe continues to grapple with Covid-19 and its societal and economic impacts, it is noteworthy how some positive themes are emerging: Increased pressure is being brought to bear on president (Trump), and past president (Zuma), to hold each of them accountable for ‘unusual’ payments to avoid tax and to prove guilt on corruption…
In my previous article in this two-part series, I looked at how consumer behaviour is changing as a result of the ongoing Covid-19 crisis. As people’s attitudes, spending patterns, working lives, and behaviours evolve to accommodate a new reality, each enterprise in the world will also need to adjust how it operates to minimise the damage…
As we survey the markets for the third quarter of 2020, we need to look past the September pull-back to recall that July and August were both exceptionally strong months. Back then, the tech titans and trillions of dollars in stimulus programmes were powering stock markets to giddy heights, with the MSCI World Stocks Index…
We live in strange times with little visibility into what lies ahead for the markets in the months to come. Despite Covid-19 plunging every major economy in the world into a downturn for at least one quarter of the year, stock exchanges worldwide and especially in the US have enjoyed an extraordinary recovery, albeit with…
In the times of the ancients, rulers like Roman emperor Nero would ‘debase’ their sovereign currencies by adding lower value metals to gold and silver coins to increase the supply of money. Throughout history, this has seldom ended well because of the inevitable inflation in consumer prices that follows currency debasement. In today’s world of…
South Africa has one of the highest measures of income and wealth inequality in the world. But we are not alone. The benefits of economic growth in many major developed economies are increasingly not being shared evenly. Governments can play a key role in making economic growth more inclusive through various actions: Rethinking policy goals…
While 2020 has been a year unlike any other and we certainly hope that we are through the worst of it – the infection rates, the lockdowns, the economic impact, the fear and the uncertainty – perhaps we need to realise that this is potentially the new normal and not just an isolated bump in the road.…
This week’s theme focuses on success and regress over the past week within corporate and country specific contexts. Ironically, we feature the Tesla share price as a loser, although we continue to support the profound innovation and global disruption emanating from the company itself. Conversely, traditional homegrown South African grocer Shoprite, delivered a most impressive…
This week’s global news focuses on a somewhat positive aspect of the Covid-19 pandemic – the acceleration in adapting and developing technologies that can minimise the impact on the environment: France is allocating a significant portion of newly available funds to green technology; Amazon is making progress in overcoming legislative hurdles to enable it to…
Amazon, Microsoft, Facebook and Tesla are notable beneficiaries of the accelerating trend towards a digitalized economy. This week it was announced that the world’s richest man is now also the world’s first $200 billionaire. Amazon CEO Jeff Bezos broke the wealth barrier on Wednesday as the shares of his company continued to surge on skyrocketing demand for online…
This article was written by Professor Ivor Sarakinsky – bespoke for Dynasty clients. In times of the long knives, corruption is a double-edged sword. The factional battles within the ANC are now coming to a head as groupings fight for control, rather than the heart and soul, of the organisation. Who will remain standing, will…
As at the time of writing, the S&P 500 is headed to its fourth-straight weekly advance, with technology companies amongst the leaders in the benchmark’s gains. It is common knowledge that major technology companies have been a beneficiary of the acceleration to digitalisation caused by business and consumer responses to Covid-19. But on Wednesday, Apple…
Since the lows on 23 March 2020, the S&P500 has bounced by just over 50%. This has largely been driven by technology heavyweights, such as Apple (up 102%), Amazon (up 65%) and Tesla, which is likely to soon be added to the S&P500, (up 280%!). Together the top technology companies comprise about 22% of this…
There is palpable anger in the land about corruption. The anger is largely focused on what the ANC is doing and failing to do about the scourge. If we separate party and state, it is useful to look at the scoreboard of what the state has achieved so far in fighting corruption. Critical state institutions…
Since the heavy crash and subsequent rally in global equity markets in the first half of this year, many investment market participants have been asking about the extent and timing of the recovery from the rapid and devastating impact of the fight against the spread of the Covid-19 virus. These questions are often based on…
Since the heavy crash and subsequent rally in global equity markets in the first half of this year, many investment market participants have been asking about the extent and timing of the recovery from the rapid and devastating impact of the fight against the spread of the Covid-19 virus. These questions are often based on…
A question we continue to pose to ourselves is – will it be the ‘P’ or the ‘E’? This vexing subject was debated in our opinion piece dated 3 July under the same header. As major equity markets (the P), will end yet stronger in July, we note that the forward consensus earnings forecasts (the ‘E’), remains mostly…
This week bore witness to various political leaders pursuing personal and party agendas above all else, risking the prosperity of their own countries in the process. From the closure of US and Chinese consulates, to President Trump’s protectionist election campaign, and President Xi Jinping’s clashes with India, Britain, Canada, and Australia, the scale of disruption…
In a similar pattern to that of the 2008 Global Financial Crisis, it appears to be Main Street (small businesses, the middle class, and the general economy), and not Wall Street (large investment firms, major corporations, and super-wealthy individuals), who are carrying the real burden of the economic impacts of the coronavirus. Millions of people around the…
This week saw global equity markets rise once again, in defiance of worsening economic fundamentals and forward earnings forecasts, primarily caused by the Covid-19 pandemic. To explain this paradox, we have included a link to a piece by Robert J Shiller, an American economist, entitled “Understanding the Pandemic Stock Market.” Further underlying our cautious approach…
This article has been compiled exclusively for Dynasty clients by Dr Lance Vogel from Analytics Consulting, who is represented on the Dynasty Investment Committee. It is a well-known fact that corporate earnings (E) are a very influential driver of share prices (P) over the long-term. As a result, investment strategists will study the performance of…
In times of crisis, it is only natural to want to look beyond the volatility and imagine what the new normal will be when things settle down. As we all do our best to weather the storm of Covid-19, there is no shortage of forecasts and predictions about how the world will look once we…
Global markets are showing few signs of settling down, with sentiment vacillating between hopes for a sharp ‘V-shaped’ global recovery and continued concern about the economic impact of the novel coronavirus. On the one side, we have countries around the world slowly emerging from severe economic lockdowns; on the other, the reality is that the…
In trying to score Finance Minister Tito Mboweni’s much anticipated Supplementary Budget out of 10, we broke the answer up into three components: Firstly, the current fiscal situation, secondly, the quality of the plan as outlined in the document and thirdly the executability of the plan. South Africa’s finances are in pretty dire shape. The…
This week Gita Gopinath, the IMF’s chief economist, announced that the decline in GDP for 2020 would be worse than forecast a few months ago, and that the Fund has lowered its expectations for an economic rebound next year. Meanwhile in South Africa, our economy is forecast to contract by around 7% for the current…
“The individual investor should act consistently as an investor and not as a speculator.” – Benjamin Graham, a British-born American economist, professor, and investor Benjamin Graham’s statement was made in the context that the future is very difficult to predict and that decisions should be based on real facts and analysis rather than risky,…
“The difficulty lies not so much in developing new ideas as in escaping from old ones.” – John Maynard Keynes, a British economist These words especially resonate with us today as we evaluate the impact that Covid-19 will have on consumer behaviour and the way businesses will be reshaped. For example, to maintain business sustainability…
When the going gets tough, the tough get going: World leadership has been under a magnifying glass since the offset of Covid-19. Some leaders have excelled, such as Prime Minister of New Zealand – Jacinda Ardern, Prime Minister of Norway – Erna Solberg, Chancellor of Germany – Angela Merkel, and President of Taiwan – Tsai…
As we approach the end of May, the S&P Index looks set to post a gain of 4% for the month, with various stock market indices across the globe in sync with this trend. Meanwhile, in the US, 36 million Americans have filed unemployment claims and GDP has contracted by 4.8% in the first quarter…
Once again, markets this week were ignited by optimism that a potential vaccine to the coronavirus may have been discovered. Each time there is a glimmer of potential for Covid-19 preventive medication, markets tend to soar, but these fluxes are not based on fundamental tenets. Even if a cure were to be developed, approved, and…
This week was marred with those once in favour, falling out of favour. There has been public tension between President Trump and Dr Fauci, with Trump previously tweeting about firing Fauci and now saying that Fauci’s concerns over opening the economy too early, are unacceptable. President Ramaphosa has also had a challenging week, as South…
This article was written by Professor Ivor Sarakinsky – bespoke for Dynasty clients. The clichés of a crisis being an opportunity are doing the rounds at the moment with Covid-19, directly and indirectly, bringing South Africa to a near standstill. Crisis also exposes and amplifies deep-seated fault lines in society that no longer can be…
The economic distress in the US came into greater focus today with the announcement by the Labour Department that more than 20.5 million jobs were shed in April. This prompted Michelle Meyer, head of economics at Bank of America, to state that unemployment is “literally off the charts”. The estimated job loss numbers in the…
This week was once again positive for equity markets with returns for April now at staggering levels as quantified below. This has been caused by massive central bank stimulus programs across the globe, as well as by optimism that a vaccine against Covid-19 may be brought to market sooner than originally anticipated. Balance this positivity…
The World Health Organisation has specifically praised South Africa for its ‘incredible’ response to Covid-19. Meanwhile, the global community is in shock over how badly the US is handling the outbreak, with a Paris-based political scientist saying, “America has not done badly, it has done exceptionally badly” and others saying that the response from the world’s richest and most…
The world has become connected – yet at the same time isolated – as a third of the global population still suffers varying degrees of restrictions placed on their movements. These regulatory measures are warranted and have been effective in “flattening the curve”, but the general environment continues to pose many challenges. As the lockdowns…
Dynasty acknowledges that Covid-19 is first and foremost a humanitarian crisis. However, our consistent standpoint since the first regional lockdown on 23 January 2020 by the central Chinese government to quarantine the centre of the outbreak in the Hubei province, is that human and economic health are very much symbiotic. This view is also reflected…
Crises bring perspective and positive reflection with them. For instance, President Ramaphosa has been globally recognised with how he has handled the Covid-19 crisis and has continued to display strong and decisive leadership traits. This week he placed Communications and Digital Technologies Minister Stella Ndabeni-Abrahams on special leave and ordered her to make a public apology…
The Covid-19 pandemic is a source of anxiety and suffering for many people around the world. While political leaders, scientists, NGOs, and other stakeholders are working on solutions to the humanitarian and health dimensions of the crisis, our primary objective as Dynasty is to protect clients’ wealth and look after their financial interests during this…
Between the global COVID-19 crisis and the decision from Moody’s to downgrade South Africa’s sovereign credit rating in Q1 2020, the rand has had a torrid year so far. Is R18.70 to the US dollar fair value, could it fall further, and what are the chances that it could rebound? As regular readers of our…
It would be an understatement to say that the first quarter of 2020 has been a wild ride. The US’s three major stock indices — the Dow, the S&P 500 and the Nasdaq Composite — dropped 23.2%, 20% and 14.2% respectively for the quarter. The MSCI World, meanwhile, slumped 21.9% for the quarter in USD…
In a not unexpected move, Moody’s downgraded South Africa’s sovereign credit rating to one notch below investment grade at Ba1. They also kept South Africa’s outlook as negative, indicating the risk of a further downgrade within the next eighteen months. As a result of this move, South Africa will no longer form part of the…
Dynasty is deeply aware that Covid-19 is essentially a humanitarian crisis. Due to extensive media coverage on the human, social, scientific, and statistical aspects of the virus, we thought it would be informative, in the capacity of the custodians of our clients’ wealth, to run a weekly series covering the economic and investment impacts of…
Global Franchise’s defensive qualities provide support Equity markets have again fallen significantly as fears of a further spreading of the coronavirus, and likely stricter containment measures (particularly in the US), have been compounded by the emergence of a price war in the oil market, after Russia refused to agree to production cuts proposed by Saudi…
The Rand is likely to remain substantially undervalued as we wait for SA to be rebalanced out of the global bond index at the end of April 2020. The currency could strengthen somewhat after the rebalancing, especially if SA and global infection numbers have improved. The currency is significantly undervalued against all the major currencies.…
The world is slowing down, with a third of the globe having some sort of restriction placed on their freedom of movement. It is the first day of 21 days of lockdown in South Africa, while in other countries: Police in India are accused of assaulting people who do not follow the lockdown parameters; America…
What we know today is that even though the Coronavirus pandemic continues to spread across the world, with certain emerging market populations being particularly vulnerable, there is evidence that regional infection rates can indeed be contained, as evidenced this past week in China. Last Friday, in our opinion piece entitled ‘The Coronavirus – Economic Crisis or Health…
It has been an eventful week to say the least, with Covid-19 was officially named a pandemic. Although taking precautions should be encouraged, panicking and making rash decisions should not. There is potential that the reaction to Covid-19 and the oil trade war could cause a global recession, markets had the worst day on record since the global…
“Panic is highly contagious, especially in situations when nothing is known and everything is in flux.” – Stephen King Stock markets across the world had their worst day since the 2008 financial crisis on 9 March this year. A more than 30% intra-day crash in the oil price added further volatility to a market already spooked…
Covid-19 concerns continue and the impact that it is having on global economies is coming to the fore. At the moment the most heavily impacted industries are supply chains, travel and airlines. Retail has also been impacted as people are shopping less and restricting activity in public spaces. Global News After it looked like stocks were on the…
Subsequent to the 2020 Budget Speech and the announcement of a shift from negative exchange controls to a capital flow management system to regulate cross-border capital flows, the Financial Surveillance Department of the South African Reserve Bank (“FinSurv”) issued Circular No. 2/2020 (“the Circular”) outlining in (marginally) more detail the proposed capital flow management measures…
The fear from investors that COVID-19 will have an impact on global supply chains and in turn, corporate profitability, has resulted in a stampede towards safe-haven assets. This has resulted in markets falling between 10% and 14% and some of the biggest drawdowns since the 2008 Financial Crisis. We, at Dynasty, do not know exactly how deep the reversal…
As we correctly predicted, Tito Mboweni in this weeks budget speech decided against increasing the VAT and tax rates, in favour of reducing the government wage bill. Rather, he provided real income tax relief to individuals, in the form of above-inflation adjustments to all tax brackets and rebates, as well as a promise to reduce…
Moody’s has reduced South Africa’s growth forecast for 2020 to below one percent. This in itself does not bode well for the possibility of a downgrade by Moody’s at the end of March. Still, the budget speech will take place next week and this should bring South Africa’s prospects into sharper focus. Global News Roger…
Yesterday President Ramaphosa gave his State of the Nation Address (SONA) which received mixed reactions. It wasn’t that President Ramaphosa let us down on his orating skills, or in his vision of what South Africa could do for its populous and how it could be an international powerhouse. Many share his vision of this potential.…
The Senate voted to acquit President Trump to his great glee and to the Democrats’ disdain. The process is not over, and the Democrats are already talking of different avenues to take. If anything, it is displaying the pettiness of American, and in turn global, politics. Global News As was widely anticipated, President Trump will…
This week has brought eventful news: the UK is leaving the EU; Trump may be acquitted today; and the Coronavirus has been classified as a global health emergency. Locally, the Public Protector has been asked to step down; Eskom’s CEO has been creating a buzz, and Cosatu has plans to rescue Eskom! Global News Britain…
After four years of Brexit uncertainty, Prime Minister Johnson’s majority in parliament has allowed him to pass his Brexit deal! There are still hurdles before it is finalised, but the steps are in motion. Tito Mboweni flew the flag for South Africa in Davos this week, saying that besides immediate steps to resuscitate the economy,…
Please find below an article from Kevin Lings, Chief Economist, STANLIB: In 2019 the Rand strengthened by 2.8% against the US Dollar, after depreciating by -13.9% in 2018. In 2017 and 2016 the Rand had strengthened by 10.5% and 13.2% respectively, after collapsing by -25.4% against the US Dollar in 2015. Clearly the Rand is…
What an eventful week: The impeachment trial has begun, Russia’s government resigned, and Australia received some desperately needed rain. Locally, there have been many shifts too – the SARB lowered rates, the Zondo Commission resumed, and President Ramaphosa made forward strides with regards to Eskom. Global News President Trump’s impeachment trial has begun. Democrat Adam Schiff read…
We continue to live in risky times, but as we noted in our final newsletter for 2019, the markets last year outperformed expectations and delivered solid returns for investors. Looking ahead to 2020, our message continues to be that, while we’re not overly excited about global return prospects for the year, we are not anticipating…
We have faced situations where distributions to beneficiaries of offshore trusts are problematic where the recipients are tax resident in various countries around the globe, such as the US, UK, Australia, Israel and Europe. We’ve asked Robyn to provide her expert insight, the first jurisdiction she is focussing on is the US, with the other…
Endowments are an overlooked instrument among people seeking to maximise the tax efficiency of their investment portfolios, but they can be a useful tool under certain circumstances. They are particularly useful for people who have a higher marginal tax rate than 30%. We believe that the only class of endowment that is really worth looking…
With 2019 rapidly unwinding, it is an opportune time to reflect on the year that was and to cast our eyes ahead to 2020. But first, let’s rewind to 2017, an uncertain and difficult year for South Africa’s economy. As we sat on tenterhooks to find out who would lead the ANC and the country,…
Welcome to our last News Flash of 2019. We wish you peace and joy as the year draws to a close and may your journey into the new decade continue on this note, accompanied by much prosperity. Our Weekly News Flashes will resume on the 10 January 2020. Global News Boris Johnson has won a conservative…
SAA has finally gone into business rescue. What this means for the long-term prospects of the business is still unknown, but a business rescue practitioner will be appointed immediately. This may be a good move as at least changes are being made to the bulky state-owned enterprises, and this will in-turn alleviate the weight bearing…
Over the past few weeks there have been many developments regarding the health of South Africa’s economy, centering around whether there will be a downgrade to junk status in March 2020. Currently, this seems like the most likely scenario, and for this reason, Dynasty is maintaining its investment strategy of protecting our clients’ portfolios from…
A mosaic or tapestry of news was in store for us this week. Many different stories evolved as we made our trudge towards the end of 2019. In South Africa, there were new appointments to SOE leadership positions, accompanied by arrests in connection with state capture and corruption. Globally, the US passed a bill to…
Globally, there continues to be much disruption: China is battling to maintain growth in the face of the Trade War; Germany has been flirting with recession for years now; Hong Kong is in turmoil; and South Africa is just attempting to stay afloat. As a result of this, Moody’s has adjusted its global economic outlook negatively, a…
The three big stories of the week have been that: China and the US seem to be on their way to the first phase of trade agreements to mitigate the trade war; President Trump’s impeachment enquiry is heating up; and President Ramaphosa is focusing on gaining investment for South Africa. Global News China and the…
This week Finance Minister Tito Mboweni gave his Medium-Term Budget Policy Statement (MTBPS) and painted a gloomy picture. Debt has ballooned, and the country is no better off, unemployment is at record highs, and Eskom is without a credible plan. Global News Democrats took the next step in the impeachment process of President Trump. The US House…
The step change in the Government fiscal numbers depicted in the Budget in Feb 2019 compared with those released in the MTBPS in Oct 2019 – only 6 months later – cannot be ignored Obviously the Moody’s credit rating announcement scheduled for tonight is a primary concern for the financial markets and SA’s inclusion in…
So much has happened this week — maybe it is the last surge of fervour before the lull of the end of the year: the DA has had a week horribilis that will hopefully precede much-needed introspection; Brexit has had its feathers severely ruffled once again, but is seemingly moving closer to a possible conclusion; and…
Even though load-shedding unexpectedly reared its head again this week, there have been many positive cogs turning South Africa’s future and eradicating the rot of state corruption. Even though it seems that Zuma’s cronies are still at work, many of them are being removed week by week from the influence they have had on how…
High net worth families used to rely on creating a trust as a tax-efficient vehicle for growing their assets and passing wealth from generation to generation. But tax authorities and governments around the world have tightened up laws and regulations to prevent the affluent from using trusts to shield their income and capital gains from…
Despite some blonde global leaders recent efforts, the world is more open to emigration than ever before, capital knows no borders, and it’s increasingly common for the members of a mid to high-income South African family to be scattered around the globe. From the young professional working in Dubai for a few years before returning…
With more and more people formally emigrating from South Africa, many because they have been advised that emigration automatically terminates one’s tax residency in South Africa, it is worthwhile revisiting how one ceases to be tax resident in South Africa and the South African tax obligations of the termination of South African tax residency. An…
As we enter the home stretch of 2019, many of the same themes that have dominated headlines for the past three years continue to dictate the direction of the markets. But in addition to the volatile brew of Brexit, trade wars and instability in the Middle East, a number of analysts and economists are beginning…
After a gloomy midweek, global markets have recovered slightly, despite the multiple adversaries, the biggest of which is the ongoing trade war. The soap opera of current politics continues to grasp attention from the concern of a potential global recession. Global News The ISM Manufacturing Index, which tracks manufacturing activity in the US, posted the biggest contraction in September since…
This week has been a big news week, with our two top newsmakers President Donald Trump and Prime Minister Boris Johnson in seriously hot water. A complaint was filed over a call President Trump made to the Ukrainian President, and Prime Minister Johnson was found to have lied to the Queen. The week brought into…
It is not all trade wars and Brexit news this week, only partly. Of course, sadly, that does not mean that it is all good news. There was a drone attack on a Saudi Arabian oil facility which has been blamed on Iran. After existing tensions with Iran, President Trump threw his weight behind Saudi…
This week was all about politicians and their impact on society, from Prime Minister Boris Johnson wanting a no-deal Brexit to President Donald Trump flexing his negotiation muscles. Then to local shores, where politicians who promote socialism are stealing from the poor. Global News Prime Minister Boris Johnson continued to be in hot water this…
Cape Town hosted the World Economic Forum on Africa this week. It was an opportunity for President Cyril Ramaphosa to show that South Africa is still an economic leader in Africa. This, however, got overshadowed by protests against violence towards women and femicide in the country. Other African countries also criticised South Africa for not…
There seems to be a measure of closure on the horizon to events that have occupied the news for the past two years and more – the Brexit deadline is on its way and Prime Minister Boris Johnson’s actions do not seem to indicate any intention of postponement; trade talks are being mediated; and plans…
President Donald Trump had a busy week of tweets and announcements. He cancelled a meeting with the Prime Minister of Denmark, Mette Frederiksen, because she said that he couldn’t buy Greenland; he said to reporters at the White House that “I’m the chosen one;” he said that Jewish people who vote for Democrats are disloyal,…
National Health Insurance (NHI), the Public Protector, Eskom, ANC infighting, Trump, Trade Wars, the Fed… the list goes on. These are all factors that have been impacting the rand of late and may continue to do so for the foreseeable future. The rand fell by 12% in 24 days from its intra-day low of R13.80/$ on…
It has been a mixed and volatile week. US stocks suffered one of their biggest single-day fall-offs this year in the middle of the week; there has been a lot of talk around whether a recession is on the horizon due to the prolonged trade war; and the first draft of the National Health Insurance bill was…
This week, President Donald Trump and Prime Minister Boris Johnson put the “boy” in “boisterous”. Both Leaders came out guns blazing with President Trump calling out the Chinese saying that China continues to “rip off” the US and adding additional tariffs, and Prime Minister Johnson has acted dogmatically in keeping his eye on Brexit’s October deadline.…
Several months ago, we wrote about Dynasty’s concerns surrounding Eskom, referring to it as the “the elephant in the room.” These views have come further to fruition as Eskom’s gargantuan weight on South Africa’s fiscal health is all the more evident. This week Moody’s issued a warning that additional bailouts to support Eskom are “credit…
Much of what has happened this week emulates the state of politics and government at this time. Meetings about meetings, bureaucracy and gridlock − the trade war between the US and China is continuing with stunted progress, the UK is making a no-deal Brexit next to impossible, and the Zondo Commission had its star witness,…
We’re halfway through the year, and there are few signs that the geopolitical volatility that has characterised the past three years will abate any time soon. The same headlines continue to spell uncertainty for the markets — Trump, trade wars and Brexit. Even so, equity markets worldwide enjoyed a strong quarter and first half to…
With the change to the exemption for foreign-earned income coming into effect on 1 March 2020, many expatriates are being advised to financially emigrate in order to ensure that they are not taxed in South Africa on their world-wide income. Such advice is not necessarily correct and will depend on the factual circumstances applicable to…
In my first two articles in this series, I described and evaluated the pros and cons of some of the most popular equity investment styles, including value, momentum, size and low volatility. This time, I’ll discuss the quality approach and how different investment styles influence our philosophy. Quality is an approach where the asset management…
The government introduced tax-free savings accounts (TFSA’s) in the 2015/6 tax year as a way to encourage South Africans to save more money. Since then, most financial services providers have added a range of tax-free savings products to their portfolios and many South Africans have embraced them as a tax-efficient way to invest. Unlike retirement…
A good news week! Many interesting and exciting things happened this week that could be small indicators for what the future holds. Christine Lagarde is set to replace Mario Draghi as President of the European Central Bank (ECB); the trade war between China and the US was placed on hold; and SARS is going after…
The G-20 Summit is underway. Although there has been a lot of commotion around the summit, it has not been about the summit itself but rather about President Trump, his threats, and the trade wars he is broaching around the world. President Trump said that if the US and China do not make significant progress…
President Ramaphosa gave an eloquent and inspirational State of the Nation Address ( SONA ) last night and although it is difficult not to feel proud of having a President like Cyril (especially when some are led by the likes of Donald Trump) the politics of it all are still baffling. We know that we…
Putting all the processes aside, it does look as though Boris Johnson is going to become Prime Minister of the United Kingdom. At least we are in for better speeches than President Trump but a similar boisterous attitude and hairstyle. Global News Boris Johnson is the front runner in leading the Conservative Party’s nomination in the…
It seems as though Ramaphosa winning the Presidency was a battle, and the war has only just begun. This week provided the South African populous an insight into how divided the ANC is. A prime example of this division came when Ace Magashule, the Secretary-General, of the ANC, made comments on expanding the Reserve Bank’s…
Deep divisions within the ANC remain We survived the election and the second wave of turbulence surrounding President Ramaphosa’s Cabinet announcement. Does this mean that there are blue skies ahead? There will be some turbulence and it will now take different forms that a full Parliament and Executive is in place. The Cabinet provides some…
We are in for an exciting week! On Sunday or Monday President Ramaphosa will announce his newly appointment Cabinet. The decisions made here will be a signal of his power and intention as President – so far it is looking good. David Mabuza, Deputy President, has not taken his oath of office and neither has Nomvula Mokonyane – Minister…
This week, trade war negotiations between America and China boiled over. Trump tipped over the pot, exiting negotiations and increasing tariffs. China has since retaliated. Theresa May has been asked to step down as Prime Minister and bookies are betting on Boris Johnson as her successor. Cyril Ramaphosa has maintained leadership of South Africa, and…
The election circus The election circus has come and gone with the advertising posters on light posts all that remains. There were lots of harlequins, clowns and jesters whose antics were neither funny nor entertaining. This may explain the disturbing 7.4% decline in voter turnout. Citizens were simply not amused. About 9 million eligible voters…
We await the final results of the General Election without bated breath. It seems that our predictions are going to be fairly spot on with little fluctuation in the polling numbers throughout the counting rally. At the time of writing, the polls currently stand at ANC 57.34%, the DA 21.05%, and the EFF 10.32%, and we are…
Brexit and the US-Sino trade war are in the news again this week, but we are more focused on our own General Elections taking place in just under a week on the 8th May. We have asked our consulting political analyst, Professor Ivor Sarakinsky, to contribute an exclusive article for our clients on his insights…
Ivor Sarakinsky has been Dynasty’s primary consulting political analyst for some years now, he teaches at the Wits School of Governance, has a PhD in Political Studies from the University of the Witwatersrand, and recently obtained his professorship. He has achieved much in his career — for example he was an expert for the ANC’s…
In South Africa, the campaigning to the lead up to the general election on the 8th of May is getting heated. There is concern over the election results as it is unclear whether the ANC will gain strong enough support from voters in order for President Ramaphosa to stave off the factional opposition within his Party to be able…
Inline with the spirit of Passover and Easter celebrations we are sending out the News Flash today rather than on Friday. This week was eventful both locally and internationally: Moody’s released their in-depth annual analysis on South Africa, the redacted version of Mueller’s Report may be released, and Notre-Dame went up in flames.
Local electioneering will continue to dominate the news cycle as the campaigning heats up ahead of next month’s elections. Expect to see increased service-delivery protests and the concomitant finger-pointing we saw in Alex this week.
Welcome to our update for the first quarter of 2019, which reflects a healthy recovery in local and offshore equity markets, following the downturn in the last quarter of 2018. The performance of the market over this period vindicates our approach of focusing heavily offshore, investing in quality funds and assets, and remaining invested in the…
A question that is often raised in estate planning is what to do about an inheritance left to children. While the definition of a child in the legal sense refers to the age of majority, being the age of 18 in terms of the Children’s Act, when we talk of children in the estate planning…
In my previous article in this series, I explored how retirement funding can help you to optimise your tax efficiency while enabling you to save for the future. In this article, I shall examine the role of living annuities as a tax-efficient vehicle for conserving capital and generating income during your retirement years
In my previous article in this series, I looked at the role of investment styles in how asset management firms pick stocks and shares. I also delved into the pros and cons of the value investment style. In this article, I’ll briefly look at some of the other popular investment styles.
