New Road Capital News

August was quite a risk-off month for markets both locally and globally, there was selling pressure across the board after the great returns seen during July. The All Share, developed market equities and emerging market equities were all down for the month. This does however make the All Share look particularly attractive on a valuation basis.

The overall investor sentiment was cautious in September, impacting both domestic and international markets. Following fears of interest rates being kept high for extended periods, there was a widespread trend of selling, leading to declines in most asset classes. Nevertheless, we believe that the volatility is short-term and has changed little in terms of long-term expectations.

October saw a global equities sell-off akin to September, influenced by global unrest and continuing elevated interest rates. Despite short-term fluctuations, the market's medium- to long-term outlook remains steady, with attractive valuations. South African bonds stood out for their promising returns, despite a risk-off climate, with the ALBI demonstrating resilience amid equity market turbulence.

Model portfolios often make use of multiple funds from the same risk category in the same portfolio based on the idea of diversifying manager risk. In this article we compare the benefit of manager diversification versus diversification across asset classes to determine whether any risk is truly addressed.

Interest rates have been rising for the past two years to combat high inflation rate. To understand where interest rates are likely to go from here, this article explores the building blocks of the inflation figure to determine what the main driver is.

After closing 2023 on a high note with robust market performance, January 2024 was more mixed. Despite the underperformance in local and emerging equity markets, driven by challenges in China, the resilience in developed markets, particularly the US, and controlled inflation levels suggest an optimistic outlook, underpinned by strong economic indicators and a potential plateau in interest rate cycles.

Transitioning from the upbeat close of 2023, February 2024 unfolded with mixed market outcomes. Locally, the ALSI extended its downward trajectory amidst a lukewarm response to the South African budget speech, while global markets showcased resilience, particularly as emerging economies were buoyed by a recovery in China. Amidst looming uncertainties surrounding elections and policy, a gradual moderation in inflation, as well as attractive valuations suggest that there may be good prospects awaiting past the heightened volatility.

The thought of outperforming the market is every investor’s dream, but with so many managers attempting to add value through active security selection, is it possible to consistently add value? And is the source of excess returns due to stock picking skill, or may it be attributable to another external factor? We consider these ideas in this article.

It’s often tempting to focus on one asset class and fall back on selection for returns and risk protection but this ignores the immense value of having a multi asset portfolio. This article illustrates this by showing how a simple blend can perform better than a pure equity fund.

April saw a reversal of developed market dominance with local equities and bonds outperforming, driven by risk-on sentiment towards emerging markets, including South Africa. Sticky inflation in developed markets, particularly the US, led to expectations of higher rates persisting throughout 2024, weighing on offshore assets. Looking ahead, rates may only start declining in early 2025; however, underlying fundamentals such as economic figures and earnings are still strong, providing tailwinds in the high interest rate environment.

May was a positive month for asset classes globally and locally, with local equities ending up despite local uncertainties and developed markets achieving an excellent 4.5% return in dollar terms on the back of more Tech rallies. US inflation slowed once more, breaking a two-month upward trend and local headline inflation maintained within the target band. The rand-dollar exchange rate was volatile but overall flat month-over-month. Bonds had a good month, with the ALBI and offshore bonds both up about 0.8% in their respective currencies. Initial reactions to the South African election outcomes were positive, with both bonds and equities rising, while the rand regained some strength on the Monday following the final results.

The multi asset income category contains a wide variety strategies each taking different risks. This article illustrates this by discussing three funds with very different strategies and showing how their performance and risk metrics differ.

In this article, we examine overconfidence and hindsight bias in predictions, using the 2024 US presidential election as an example. We draw parallels to investing, warning against overconfidence in active stock picking while suggesting that portfolio diversification is a powerful tool for reducing risk.

Global markets rallied in June, led by SA bonds and equities as the end of the interest rate cycle nears.

August saw a quick recovery in equities following an early sell-off, with local and global markets posting strong gains. Inflation is cooling in both the U.S. and South Africa, and anticipated interest rate cuts are expected to further boost the economy. Bonds also performed well, with local and offshore markets delivering solid returns.

In this article, we highlight that historical data shows little difference between returns from all-time highs versus average conditions, challenging the notion that market highs could signal imminent downturns.

Offshore income is often overlooked as a building block in multi asset portfolios despite the wide variety in instruments. This article illustrates how US treasuries in particular are useful in multi asset portfolios, especially when combined with local equity.

High valuation multiples often appear "expensive," but growth expectations can quickly shift this perception. This article explores how robust earnings growth can justify elevated P/E ratios, emphasizing the need for deeper analysis beyond surface-level metrics.

It is common to find multiple equity funds held together to diversify manager strategies. This article explores whether such diversification is beneficial.