Eben Louw

Globally, while Trump’s anticipated pro-growth and pro-business policies will likely support US equities over the short term, we remain cognisant of stretched valuations, market concentration, and risks to the US economy. Confidence in US stock markets is at record highs, with optimistic earnings expectations, providing little room for disappointment. Many large tech companies are also highly vulnerable to proposed tariff increases. 

Elsewhere, less stretched valuations and pessimistic positioning provide attractive opportunities, but relatively lacklustre growth, political chaos, and potential trade wars suggest caution. China’s stimulus capacity and increased willingness for intervention could provide support, benefiting emerging markets, but whether these measures will be enough to offset the impact of harsh tariffs from the US remains to be seen.  

Local markets have seen an impressive recovery since the formation of the GNU, with improved sentiment and risk appetite combined with attractive valuations resulting in a significant re-rating of local assets. While the theme remains in place, effective policy execution and delivery on growth will be crucial to support earnings. Local bonds should continue to benefit from anticipated rate cuts, given the low inflationary environment, while still providing some yield buffer to external shocks. We are wary of local credit, with risk compensation (spreads) at historically low levels. 

We are taking a diversified approach to regional exposures, preferring active management at the sector and stock level. We are maintaining neutral equity weightings, while also maintaining a moderate level of SA bond duration across portfolios.