Kim Rassou

Global economic backdrop:

Recent trade policy developments, particularly between the US and China, have created uncertainty. While some tariffs have been removed or suspended, overall US tariff levels remain high, which could dampen global growth and increase US prices. Economic data remains resilient, partly due to pre-tariff stockpiling, but the full impact of tariffs will become clearer in the coming weeks.

Asset class performance:

Global equities were considered expensive before recent volatility, mainly due to the large US weighting in benchmarks. Valuations have not improved enough to warrant increased exposure. The outlook for global bonds is mixed: weaker growth should lower yields, but fiscal concerns may push yields higher. Cash yields are expected to continue falling.

South Africa:

The local economic outlook is weaker than at the start of the year but better than the previous decade, thanks to structural reforms in electricity, logistics, and visas. South African asset classes remain attractively valued and are expected to deliver above-average returns over the next five to 10 years. The rand is still undervalued and could appreciate against the US dollar in the medium term.

Tactical asset allocation:

The global economic outlook has deteriorated, and there is still uncertainty over US policy. Local (South African) assets are favoured due to attractive valuations and improved growth prospects from ongoing reforms.

Key takeaways:

Caution is advised on global equities due to high valuations and policy uncertainty. South African assets are seen as offering better medium- to long-term return prospects. Investors should be aware of market and currency risks, and past performance is not a guarantee of future results.

‍