Market moves have been dominated by politics this year, said Isabelle Mateos y Lago, managing director and chief multi-asset strategist at BlackRock, adding that the prolonged environment of uncertainty and political risk, both in South Africa and globally, means that investors should start cutting through the noise to find emerging investment trends.
“Going forward we are going to see something very different, which not is going to be linked to a specific event, but general uncertainty. Uncertainty on every topic from what the US administration is going to do, to whether Europe is going to pull its act together in the next five years until the next cycle of elections.”
She explained how the bond and stock markets registered movement in response to polls in France. “That gives you an idea of the potential (a change in leadership would have) for South Africa.”
While history is not necessarily the best guide to future growth, global earnings growth is strong and can continue.
“If you invest in US treasuries or EU government bonds you essentially get more volatility than your income cushion, so that’s just not a great investment decision. On the other hand, if you invest in emerging market debt or, for that matter, in US investment grade credit, you still get a lot more income and that’s the large reason why you’re seeing so many flows coming into emerging market debt.
“That’s the reason why, despite the politics [in South Africa], global investors keep buying South African bonds. It’s because of exactly this picture, it’s the only place where investors get enough yield to manage the volatility seen in the market and that’s likely to continue.”
“Climate change is a very fundamental trend, and so far a largely underappreciated one for most investors.” She said the climate change impact on investments is likely to manifest in terms of four drivers:
Mateos y Lago was speaking at the Discovery Financial Planning Summit in Sandton.
