STANLIB Podcasts

The investment landscape is inherently uncertain and markets can take an unexpected turn at any point.

Managers of multi-asset income funds have the benefit of being able to actively shift between different fixed income asset classes and property to deliver bond-like returns with a smoother return profile and lower risk, through different market cycles.

Sylvester Kobo, Deputy Head of Fixed Income at STANLIB and co-manager of the STANLIB Flexible Income Fund recently spoke to Moneyweb’s Simon Brown on why multi-asset income funds offer a compelling solution.

US inflation date for September contained two surprises: CPI went up 0.2% m/m, against market expectations for 0.1% m/m, and core inflation rose by 0.3% m/m vs expectations for 0.2% m/m. Positively, shelter inflation is slowing meaningfully. The latest print is unlikely to derail the downward interest rate trajectory, and the US Federal Reserve is expected to cut by 25 bps at its November meeting.

China’s Finance Minister has outlined areas where the government intends to deliver fiscal stimulus. However, he gave no details, which are only expected to be unveiled after China’s parliament meets. These steps follow government’s previously-announced reductions in interest rates. The Chinese authorities are focusing on stabilizing the economy to achieve their annual growth target of 5%.

Click here to listen to the podcast.

The investment landscape is inherently uncertain and markets can take an unexpected turn at any point.

Managers of multi-asset income funds have the benefit of being able to actively shift between different fixed income asset classes and property to deliver bond-like returns with a smoother return profile and lower risk, through different market cycles.

Sylvester Kobo, Deputy Head of Fixed Income at STANLIB and co-manager of the STANLIB Flexible Income Fund recently spoke to Moneyweb’s Simon Brown on why multi-asset income funds offer a compelling solution.

Several US labour market reports released last week were surprisingly strong. The US created 254 000 jobs in September, well above expectations for 150 000 jobs, while unemployment fell to 4.1% from 4.2%. This encouraged the equity market, as it suggested the US is not about to move into recession, but it dampened hopes for a 50 bps interest rate cut. The next cut is likely to be only 25 bps.

In SA, National Treasury’s estimate of revenue and expenditure for August showed the government is generally keeping spending within budget. Individual income tax collection was buoyant, largely as a result of fiscal drag, while corporate tax collection was also surprisingly strong. This means the October Medium-Term Budget Policy Statement (MTBPS) is likely to show only a modest revenue shortfall for the year.

Click here to listen to the podcast.

China’s authorities last week unveiled a series of measures designed to stabilize the property sector and stimulate consumer spending. These measures included a cut in banks’ reserve requirements and in interest rates. Financial markets were encouraged, having expected any policy stimulus would only follow the US presidential election.

Sentiment in SA has improved since the May election and this is reflected in markets and the currency. But recent economic indicators are lackluster, e.g. building plans, mining production and job creation. Positive sentiment needs to be translated into improved investment and higher employment, which would systematically uplift economic performance.

The US Federal Reserve will meet on Wednesday this week to discuss interest rates and the South African Reserve Bank (SARB) will meet on Thursday. Both central banks are expected to cut rates by 25 bps and signal further cuts in the rest of this year and 2025. The SARB is most likely to cut by only 25 bps, given its cautious approach to keeping inflation around 4.5% and withdrawals from pensions under the two-pot system.

Click here to listen to the podcast.

The US August labour market report was mixed. It showed an improvement in the unemployment rate to 4.2% from 4.3% in July, but the number of jobs created was below the monthly average. Whether the US Fed will cut interest rates by 25 bps or 50 bps later this month to stimulate the economy is under debate. STANLIB believes a 25 bps cut is most likely, followed by a series of others.

In Q2 2024, SA’s GDP grew by 0.4% q/q, better than the zero rate of growth in Q1, but still very weak. Growth was driven by higher electricity production, financial services and retail spending post-election. While there is no sign of broad-based growth, looming interest rate cuts, the cash released from the two-pot retirement system and public-private partnerships may stimulate the economy next year.

Click here to listen to the podcast.

US core PCE inflation for July, at 2.6% y/y, was welcomed because it shows inflation is under control, although it still above the US Federal Reserve’s target of 2%. In Europe, consumer inflation has moderated to 2.2% y/y, close to the European Central Bank’s target of 2%, which may prompt the bank to cut rates again before the end of the year.

SA’s producer inflation rate of 4.2% y/y for July reflected the second consecutive month-on-month decline. However, it suggests a lacklustre manufacturing sector, with no pricing power. South African government revenue for July has printed slightly behind budget, while expenditure is slightly ahead of budget. This is not a risk yet but, if the economy fails to gain momentum, there is a risk of a revenue shortfall in the February 2025 Budget.

Click here to listen to the podcast

SA’s headline Consumer Price Inflation (CPI) rate for July was surprisingly subdued, slowing to 4.6% from 5.1% in June. This reflects a slightly lower than expected electricity tariff hike and a slowdown in food price increases, as well as fuel price cuts. The slowing inflation trend makes it more likely that the SA Reserve Bank will start to cut interest rates in September.

In the US, signals from the Federal Open Market Committee and Federal Reserve chairman Jerome Powell indicate more confidence that inflation is trending downwards. It has also become clear that the US labour market is weakening. The longer the Fed waits to cut rates, the greater the risk that the economy will go into recession. STANLIB expects the Fed will implement a series of gradual interest rate cuts, starting in September and continuing into 2025. Click here to listen to the podcast.

The release of generally encouraging CPI and PPI data in the US, together with a strong retail sales report, helped global equity and bond markets to recover last week. There are high expectations that the US Federal Reserve will start to reduce interest rates in September, probably starting with a 25 bps cut.

In SA, strong June retail sales delivered a positive surprise to markets, but may not be sustainable. Mining data was disappointing, underlining a longer-term decline in the sector which goes beyond electricity supply. The unemployment rate moved above 33% in Q2 2024, with about 8.5 million unemployed. Without higher economic growth, SA’s unemployment will continue to increase. Click here to listen to the podcast.