South Africa never ceases to amaze me. From a foregone conclusion that Cyril was in for another term, the Rand showing a distinctly stronger bias, to an announcement suggesting impeachment and the concomitant “collapse” back towards R18/US$. This followed by rumour of a resignation, then by a decision to take the ruling on review and the Rand reverting to the low R17’s.

Where to next?

So, let’s go to matters more boring and predictable like the End of Year Springbok Tour and the Soccer World Cup. The Boks fortunes varied from bad refereeing to great and well-deserved victories. Jokes aside, the new brand of running rugby is really exciting and has the rugby world taking note. Changing tack, the Soccer World Cup is also dishing up a remarkable set of results. Japan’s prowess, beating some top teams and many no name teams, surprising even themselves, has been exhilarating! As we approach the sharp end of this massive global event, I can’t wait to see the upsets continuing. Having said this, last night’s Brazil win over the remarkable Japanese brought normality back. Quality and experience trumped enthusiasm.

So, on to markets and the business of investment. Patience has, in the short term, been rewarded. Markets having been under the pump with no place to hide, have reacted well to signs that the Fed and other Central Bank’s relentlessly hiked interest rates, have somewhat tamed one of the key problems, that of inflation. Key indices are nicely up and markets have fared well for two consecutive months. Whilst inflation has probably been topped, the “R” word remains a threat. Recession with the austerity it introduces remains a real risk. At least Central Banks have interest rates, which are at cyclical highs, as a tool to mitigate this risk!

China has also been a sleeping giant. Suffering under rather draconian lock down laws, and approaching winter, its demand for goods and resources has disappeared. Unlike the Cappuccino’s missed during Covid, demand for resources, goods and materials doesn’t disappear. It builds up. Emerging Markets such as SA benefit greatly when resources are in demand. It is entirely reasonable to imagine a spike in demand as China returns to normal. Early indications of this are present. China is also pregnant with massive infrastructure generation and regeneration. This more politically motivated process will also create demand from the same EM countries. A further interesting development is the over exuberance displayed with regard clean economies and ESG biases. The world might aspire to go Green, but it has not properly considered the reality and timelines for this to be achieved. This probable reversal and deferral will further support countries and economies who are rich in fossil fuels.

Picking up on my earlier point regarding South Africa, and our stumbling from crisis to crisis, it is notable that the globally recognised Ratings Agencies are reviewing SA Inc. and many of our State-Owned Enterprises more favourably. What I think might be termed Resource Revival One, already banked, and which materially changed our accounts, reserves, Exchange Rate and the economy in general, might be a precursor to the next wave of resource driven economic activity and revival. What we need to watch out for are out of the ordinary events. Cyril’s future, global recession and escalation in global conflict are top of my pops. If the future locally and globally becomes benign, a solution is found to the standoff in Eastern Europe, Cyril survives and recession risks abate, the near to middle term can be rewarding to investors. In the meantime, interest rates are at a premium and guaranteed products are attractive.

As I always like to note, stay diversified across products, asset classes and geographies.

It is the end to another testing year. I will, after 37 years of scripting this review and opinion, be sharing the responsibility and pleasure with my colleague, and our Managing Director, Andrew Duvenage. I look forward to the future. NFB, thanks to you our clients and Institutional partners, our wonderful staff and management team, is in fine fettle.

Thank you for your custom and for the many referrals of friends and family to NFB’s team.

I wish you well over the Festive Season and look forward to us re-engaging in 2023.


Read more from Mike