Noble Wealth Management - Economic & Market Update - June 2024

Trump’s assassination attempt (the first of its kind on a president/presidential candidate in 43 years) four months before the US Presidential election and days before he was officially named the Republican nominee has made its mark on history. It’s amazing what a few millimetres can do. 

The image of a bloodied 78-year-old man raising a fist just a minute after the shooting is the possible symbol that may sway US voters and is already available on T-shirts and in tattoo parlours across the USA

While we aren’t sure how much of his ear is missing, Donald, as one would expect, is making the very best of the situation and sporting a seriously oversized compression plaster to drive the point home.  The big plaster thing has also caught on, and plenty of images are coming out of the MAGA crowd at the Republican National Convention sporting similar plasters in sympathy and support of Trump. Interestingly, however, on social platform X, Don Jnr told a reporter that the medical reports about Donald Snr’s injuries were not released because he did not require stitches.

Cue conspiracy theories!

Nonetheless, bookmakers now have the odds of Trump winning at 70%, with President Biden at 25%. The least of Biden’s woes is his COVID-19 diagnosis; many want him to step down from his bid and usher in his deputy, Kamala Harris, to take on Donald. Hard to argue against, considering President Biden recently introduced Zelensky as Putin at a NATO meeting and, in a subsequent interview, referred to Kamala Harris as Vice President Trump. For many observers, another term for the seemingly ailing and frail Biden may just be a bridge too far.

Meanwhile, on the home front, Jacob Zuma, represented by Tony Yengeni, wants his ANC disciplinary hearing to be in person and in public rather than on a virtual platform, which is much better for the optics, one would think. He’s also taking the SABC to court to try and force them to stop referring to the GNU as a GNU as he feels it’s misleading people into thinking the GNU is a GNU.

At the same time, Julius Malema “there never was a donation”, Floyd Shivambu “I have never received R10 million into my personal bank account” and Dali Mpofu “there may have been a donation, but so what, it’s not a crime”, are doing their best to mitigate the fallout from the contents of the damning affidavit by “VBS Heist Kingpin” Tshifhiwa Matodzi. Same for the SACP’s Blade Nzimande, who is desperately trying to convince us and COSATU that while there never was a VBS donation, their receiving of a possible VBS donation to fund a 2017 Birchwood Hotel conference was above board.

Unfazed by this drama, Cyril Ramaphosa’s GNU is steaming ahead in seemingly high spirits as they set about trying to fix South Africa. It’s all looking quite good so far, except maybe for Gauteng, where in Johannesburg things don’t look quite as rosy for residents who continue to be plagued by dark and potholed roads, high levels of crime, overflowing sewage, broken traffic lights, water shortages and a new R 230.00 surcharge for City Power pre-paid electricity customers.

While things look a little bleak for Gauteng, some change may still be on the cards in the coming months as we approach the local government elections. If anything is going to fix JHB, it’s the New Minister of Public Works, Dean Macpherson, announcing that government offices must be moved from their current expensive rented offices in Sandton back to the buildings they own in the JHB CBD.

Going through 100 days without load shedding has been most welcome, and it’s being closely watched by South Africans, international investors, and analysts. There is a net effect on both individual and business sentiment. At the same time, it's still early days; it would seem that Eskom has turned a corner to some degree, even though this improvement in electricity supply is also a result of the massive amounts of private generation and roof-top solar installations over the last 18 months or so.

Onto markets – it’s been a good few months

I have attached a fair bit of easy reading material that covers markets in much more detail and where we see things going from here. Some observations:

• Markets locally and globally have had a good time for the last few months, especially in the US, where the tech sector has driven up the S&P 500, the Dow Jones and the Nasdaq. It would seem that the US just keeps going up and there is no stopping it. We discuss some concerns around this in more detail in the attached Fundhouse Q2 investment outlook. Locally, the JSE has performed well, mainly because of a more positive SA outlook post-election coupled with the improvement in electricity supply. The Rand has also appreciated meaningfully, however. At the same time, this is good news for inflation, fuel prices and the cost of a new TV, a stronger Rand also places a drag on portfolio performance where it directly affects any offshore or Rand Hedge holdings, which form part of most investment portfolios these days.
• Inflation is showing continued signs of having peaked in South Africa, and there is mounting evidence that this may also be the case in the US. Yesterday, reserve Bank governor Lesetja Kganyago kept the repo rate at 8.25%, somewhat disappointing the broader market. We now expect that interest rates will start to be cut at some point in the future, maybe as early as September and while that it bad news for holders of cash, it certainly will be good news for equities and could be a further catalyst for equity upside performance. Any interest rate cuts in the US may also translate into good news for emerging markets as investors sell out of the US Dollar and look for higher yields in emerging markets.
• Geopolitical risks remain. While we have all been distracted by Donald Trump’s ear, let’s not forget that some major conflicts around the world rage on and, for the moment, do not look like they will end any time soon. If the Houthis keep blowing up ships trying to navigate the Red Sea, this will inevitably place pressure on the cost of moving goods around the world, if it isn’t already. Shipping operators are increasingly being forced to go around the bottom of Africa and through the Cape of Storms, where it has certainly lived up to its name over the last two weeks or so.

The Noble Wealth Investment portfolios have fared well, despite the drag on performance due to our strengthening Rand. Our lowest-risk Cash+ portfolio ―  NWM SA Income, posted a healthy 10.7% for the year, while our flagship pre-retirement portfolio ― NWM Balanced Plus, delivered a healthy 12.4% for the same period. Our NWM TFSA Capital Growth portfolio remained the top performer, generating 13.0% for investors.

Globally, our most cautious portfolio ― NWM Fundhouse Global Cautious, delivered a respectable 7.4% in US$ for the 12 months to the end of June and the most aggressive ― NWM Fundhouse Global Equity, a very impressive 14.8% in US$ for the same period.

While we are on portfolios, we are pretty excited to have just launched a new portfolio that will be available across all investment platforms within the next couple of days and is called the Noble Wealth Long Term Growth Portfolio. The Noble Wealth Long Term Growth Portfolio is a well-diversified, fully invested (97% equity) aggressive growth portfolio, with an ideal investment time horizon of 7 years.  Although it’s a locally domiciled portfolio, it strongly leans toward offshore equity, with direct and indirect offshore exposure increasing between 65% and 70%. We have also made use of both active and passive funds, but more so active managers as the current environment suits them better.

This is not a portfolio for your grandma’s savings unless she rides a Harley Davidson. It’s also not a portfolio for living annuity investors or cautious investors and certainly not for your day-to-day cash. It’s also not Regulation 28 compliant, so it is not suitable for pre-retirement investments such as RA’s and preservation funds. It is, however, an ideal investment for investors looking for some long-term, above-average return, who have a risk appetite and can tolerate the volatility that may well come with this type of investment. While it is aggressive, it goes without saying that Fundhouse will manage it within an appropriate risk framework that is in no way reckless. In terms of our local portfolio offering, this will be the most aggressive in the line-up. While we don’t have performance numbers yet, I have attached some back-testing analysis work that Fundhouse did in constructing the portfolio for us and the Fact Sheet that will be published monthly alongside our other fact sheets.

If you feel you may be keen to have a closer look at this, please don’t hesitate to give us a shout. We will take you through the portfolio in more detail and also try to understand if it is appropriate for what you are trying to achieve from an investment perspective.

We are also in the process of migrating across to a new administration and CRM system, which is going to revolutionise our back-office functionality and client reporting experience.

Unfortunately, we are being forced to wait out a notice period with our existing service provider, but we will begin the data migration process towards the end of October with the new system fully up and running by February 2025, Some of the exciting benefits of this new system besides making life so much easier for our administration staff, will be a mobile app for your mobile phone where you will be able to view your investments in real time with daily pricing, this applies to both onshore and offshore investments. We will also now be able to generate personalised investment review documents & fact sheets for every client which will consolidate all investments and give a detailed analysis of portfolios, asset allocation, performance graphs, internal rates of return, withdrawal and income history. We are super excited about this new development and cannot wait to begin working with it and delivering a vastly improved experience for our clients.

July 19 2024 By Robert Weedman - Noble Wealth Management