This year has been a challenging one for asset managers and their clients.
Confidence in South Africa remains dismal, and global macro risks have risen amid trade wars and a slowing global economy. This has seen an aggressive sell-off in parts of the global equity market, and particularly in the case of out-of-favour stocks and sectors.
Conversely, global investors have been comfortable to allocate capital to global bonds, despite negative-yielding debt totalling $14.8trillion (R218 trillion), and perceived safe havens in equity markets, primarily defensive and technology stocks.
Locally, the JSE has seen strong performances by gold and platinum shares on the back of sharp increases in the rand prices of precious metals. The rand price of palladium, for example, has almost tripled over the past four years. At these levels, PSG Asset Management sees no margin of safety in further investment in South African gold and platinum shares. Market participants appear to be speculating on further precious metal price increases.
We are seeing extreme divergences in the valuations of popular securities compared to those investors are shying away from. This presents risks and opportunities.