STANLIB Podcasts

Sylvester Kobo, STANLIB’s Deputy Head of Fixed Income, says as interest rates should normalize this year, the STANLIB Flexible Income Fund has significantly reduced its cash position compared with the same period last year. The fund, which has full flexibility, has shifted some profits from property into longer-dated bonds, but is highly aware of looming risks, such as the approaching local elections and tensions in the Middle East. STANLIB’s partnership with J.P. Morgan Asset Management provides the fund managers with global reach and expertise and an open relationship for sharing views.

Marius Oberholzer, STANLIB’s Head of Multi-Asset, says trends are positive for equities in 2024, but the team is managing expected market volatility. Once interest rate cutting begins, corporate activity should accelerate and earnings growth should start to materialise. In SA, there are still risks, including the looming elections, but signs of economic improvement in China should underpin demand for commodities and benefit emerging markets in general. Marius also discusses how the Multi-Asset team works closely with the J.P. Morgan Asset Management team to bring different insights and in-depth research to its decision-making. This podcast lays out the fund’s positioning in more detail.

Marius Oberholzer, STANLIB’s Head of Multi-Asset, says trends are positive for equities in 2024, but the team is managing expected market volatility. Once interest rate cutting begins, corporate activity should accelerate and earnings growth should start to materialise. In SA, there are still risks, including the looming elections, but signs of economic improvement in China should underpin demand for commodities and benefit emerging markets in general. Marius also discusses how the Multi-Asset team works closely with the J.P. Morgan Asset Management team to bring different insights and in-depth research to its decision-making. This podcast lays out the fund’s positioning in more detail.

The STANLIB Enhanced Multi Style Equity Fund, an active SA equity fund, outperforms its benchmark, the JSE’s Capped Swix Index, by taking rational decisions, says Rademeyer Vermaak, Head of STANLIB’s Systematic Solutions business. In Q1, the fund benefitted from its positioning in gold counters as well as its offshore holding in the STANLIB Global Select Fund, sub-managed by J.P. Morgan Asset Management. Rademeyer says the fund may underperform when the market is irrational, but ultimately investors will always prefer stocks that offer higher quality, good growth prospects and are cheap relative to others. Listen to Rademeyer explain the fund’s philosophy.

Internationally, the focus of the past week was on US GDP growth in Q1 and personal consumption expenditure (PCE) inflation data for March. US GDP growth, at 1.6% q/q annualized, was below consensus forecasts of 2.5% and below Q4 growth of 3.4%, largely reflecting an increase in imports and a contraction in inventories.

In SA, the latest Ipsos poll ahead of the May National Election showed that the ANC, with likely support of about 40%, will probably need to form a coalition with smaller parties, while the recently-emerged MK Party appears to have won ground at the expense of the EFF.

Click here to listen to the podcast.

Sylvester Kobo, STANLIB’s Deputy Head of Fixed Income, says as interest rates should normalize this year, the STANLIB Flexible Income Fund has significantly reduced its cash position compared with the same period last year. The fund, which has full flexibility, has shifted some profits from property into longer-dated bonds, but is highly aware of looming risks, such as the approaching local elections and tensions in the Middle East. STANLIB’s partnership with J.P. Morgan Asset Management provides the fund managers with global reach and expertise and an open relationship for sharing views.

In March, SA’s inflation was lower than expected, with headline inflation down to 5.3% y/y from 5.6% in February. However, there are pressures in key administered prices such as water and electricity, medical aid and education, which are unlikely to ease given the infrastructure backlog. This will make it hard for the SARB to achieve its inflation target of 4.5% or less – in fact, the SARB may do well to restrain inflation below 6%.

In the US, data such as retail sales and labour market conditions remain buoyant, while GDP growth expectations have been revised up to 2.2%-2.3% for the year, which is above trend. Inflation surprises over the past three months indicate the US Federal Reserve is not in a position to cut interest rates. A June rate cut is probably off the table and it is possible that cuts may not start this year.

US inflation data for March was higher than markets anticipated, the third successive month of upside surprise, says STANLIB’s Chief Economist, Kevin Lings. US core inflation is nowhere near the US Fed’s 2% target. The main culprits were increases in shelter and motor vehicle insurance costs, but inflationary pressure appears to be broadening out, to, for example, health care and food. All this implies a June interest rate cut is not realistic. Whether there is even a cut this year also depends on whether the oil price surges due to the Middle East crisis.

In this podcast, Amit Parmar, JPMAM International Equity Group vice president and investment specialist, discusses with STANLIB’s Chief Economist, Kevin Lings, how various stocks make their way into the STANLIB Global Select Fund. JPMAM uses fundamental, bottom-up stock selection, as its global team of over 80 analysts seek out companies with great business quality, sustainable earnings and long-term drivers. They apply a valuation framework to determine the price that the fund is willing to pay for each stock. Parmar also explains some of the portfolio’s over- and underweight positions and what factors influenced those decisions.

A range of data in the past week shows the US labour market remains extremely strong. For example, the US gained 303 000 jobs in March, well above market expectations, while the unemployment rate has remained below 4% for 26 months. Given that wage growth is still relatively high at 4.1%, and the recent surge in oil prices could create further inflationary pressure, the US Federal Reserve is likely to maintain a “wait and see” approach towards interest rate cuts. The first US rate may only occur in about September and there could be two, not three, cuts this year.