Market Comment
- The JSE All Share Index gained another 2.4% last week and is trading at a new 2009 high today (Monday 19th October). The market is also back at early September 2008 levels, as well as February 2007 levels.
- Our market continues to follow the offshore markets, with both the MSCI Emerging Markets Index and the MSCI World Index hitting 2009 highs last week.
- JP Morgan’s highly experienced and respected SA strategist, Deanne Gordon, continues to recommend an overweight in SA equities, neutral in SA bonds and underweight cash.
- She recommends overweighting domestic cyclical shares such as banks, general retailers, industrials and media.
BCA View (BCA is a research house based in Canada. They have researched economies and markets for 50 years).
- BCA’s view is that a cascading decline in global economic output is giving way to a potentially sharp rebound.
- They continue to recommend a fully invested position in equities.
- For equities, we remain at the “sweet” spot, where growth is strengthening while inflation is falling. “Equity investors cannot ask for anything better.”
- There is still a large bearish/sceptical crowd out there that has not yet capitulated. Further evidence of economic recovery and additional gains in shares will likely compel the underinvested into the market.
- BCA recommends staying overweight emerging markets and commodities, neutral in the US and Europe and underweight in Japan. They are scathing on Japan.
Bottom Line
- STANLIB prefers offshore equities and is overweight in offshore equities, underweight bonds relative to risk profiles and benchmarks.
- STANLIB is moderately overweight local equities and has turned more positive on local property funds (now moderately overweight from neutral), but remains underweight bonds.
Economic Weekly Review
US retail sales fell by 1.5% m/m, which was better than expected. Vehicle sales plunged by 10.4% mostly as a result of the ending of the “Cash for clunkers” deal.
- Excluding motor sales, retail sales rose by a welcome 0.5% and General Merchandise, the largest single category of retail spending, rose an impressive 0.9% m/m. The latest US retail spending data is, after adjusting for the various anomalies, more encouraging.
- Retail sales in SA fell by a substantial 7% y/y in real terms in August, illustrating that the SA consumer is still under enormous pressure. Read the full report in The Stanlib Weekly Focus.
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