It is our view that China’s growth composition has markedly changed since then – it’s become more weighted to services – and so its ability to support commodity prices, and thus global growth, is limited. While some investors hold onto the view that China will once again rescue global growth as it did when they reflated their economy in 2010/11, we are less sanguine in this regard. We remain concerned about the valuation of equities a number of indicators suggest that the stellar post-COVID19 growth in earnings, particularly internationally, is coming to an end, as illustrated in the charts below:
What is evident is how often current employment levels are followed closely by a recession. The shaded areas of this chart of the US Unemployment Rate indicate periods of recession.
With the winding down of QE and the beginning of Quantitative Tightening, we consider it prudent to pay attention to the signals provided by the bond market. We used this as a secondary indicator because intervention by Central Banks in the bond market (via Quantitative Easing) has impacted bond pricing. 10-year bond yield and the 2-year bond yield has been a harbinger of impending recession. The US yield curve is now calling a recession. More recently, the following indicators have served to confirm our caution: This supported our view that supply-side pressure was responsible for elevated commodity prices. Maersk, one of the largest shipping lines in the world, issues quarterly financial results.Īn analysis of these results revealed to us stagnant or falling volumes with freight prices driving the growth in turnover. The weakening of the US ISM from August 2021 supported concerns about the high commodity prices mentioned above. We see the dollar as a safe-haven currency and its strength from 2021 served to confirm our view that the commodity price rally was driven by supply issues rather than underlying demand. Historically, the dollar has been inversely related to commodity prices. Our exit from SA equities was confirmed by the Gryphon US Bear Market Indicator with a ‘sell’ triggered in US equities mid-2021. These indicators triggered an exit from South African equities in August 2018, The following charts give texture and depth to the data and we can now, with the benefit of hindsight, review what they were telling us with a greater appreciation and perspicacity. The data elements that inform these indicators include: business/economic cycles, commodity prices, company earnings, interest rates, and inflation.
The asset class shifts in these funds are signalled by data-based indicators using historic economic and market data – no forecasts. This prevents investors getting caught up in the “excitement and heady euphoria” of a frothy market and allows them to wait, clear-headed and sober, for sustainable opportunities. As mentioned above emotion should be kept out of the decision-making process. Having attained a credible track record, the funds have delivered consistent, predictable, inflation-beating returns. The Gryphon multi asset funds, launched in 2014, are testimony to this approach. Asset allocation should be active, dynamic and meaningful – it should expose investors to the asset class offering the best prospective risk-adjusted return.Greater value is added by asset allocation than by stock selection.The greatest threats to investment returns are costs and emotions.Gryphon’s investment philosophy is based on a few simple tenets: But while many countries have taken advantage of lower prices since 2014 to reduce energy subsidies, and some have implemented broader structural reforms, limited prospects of a substantial recovery in oil prices from current levels could have lasting implications for potential growth in oil exporters, which calls for accelerated reforms to increase diversification.Reuben Beelders – Chief Investment Officer The short-term benefits of falling oil prices to global growth remained muted by several factors, and among oil-exporting countries, those with flexible exchange rates, more diversified economies, and larger fiscal buffers fared better than others. shale oil production (2) a diminished effect of geopolitical risks (3) the inability of OPEC to regulate global oil supply and (4) softening demand prospects. The decline in oil prices resulted from (1) a boom and rapid efficiency gains in U.S. Relates that the 2014–16 collapse in oil prices failed to provide an expected boost to global growth and proved a missed opportunity for reforms.
0 kommentar(er)
