Old Mutual Investment Group

Macro Perspective 10/2022 | Investment plans and market uncertainty

March 08, 2022 Old Mutual Investment Group
Old Mutual Investment Group
Macro Perspective 10/2022 | Investment plans and market uncertainty
Show Notes Transcript Chapter Markers

Portfolio Manager, Peter Brooke, shares his latest weekly perspectives, this week navigating market uncertainty driven by the Russian war in Ukraine and its effect on growth, inflation as well as investment plans.

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Peter Brooke  00:00

My name is Peter Brooke, and I'm a Portfolio Manager at the Old Mutual Investment Group. This is Macro Perspective 10 of 2022, and I must apologize in advance if you hear a boardings call, I'm actually doing this from the airport. The problem with booking holidays six months in advance is you can't choose when you want to go. And I'm off to hike the Pondoland trail at a very tricky time for markets. 

00:25

So, markets are selling off at the moment, there's quite a lot of - there's a big risk off, driven primarily by the Russian war in Ukraine pushing up the oil price, which is a stagflationary shock. So, we get a negative effect on growth through supply chains and through oil. But we also get a negative effect on inflation through higher commodity prices. 

Exacerbating this is the politics around it, which is obviously positive in terms of the sanctions being applied, the pressure that's being brought to bear, but it has unintended consequences in terms of markets. A good example of that is, with the SWIFT shutdown, banks are forced to liquidate positions to manage risk, which causes investors to scurry around and close positions at any price. A great example of that at the moment is the nickel price, which has gone from $20,000 a ton to $100,000 a ton. That's clearly not the genuine price for nickel. But it's a good indication of the pressure as people are forced to settle positions around the world. And there could well be unintended consequences of this as it rolls through. 

01:50

Because of the political element, it makes it extremely difficult to gauge what will happen going forward. Is this a great buying opportunity? Or is it actually the start of the next recession and markets continuing to fall? My job is to allocate assets. But with that level of uncertainty, I'm not even sure if I can give good timing advice at the moment. And in the absence of that, it actually goes back to what is one's plan. 

And so, for me personally, every year in March, I invest my R36,000 into tax free savings. And I do it in March to ensure that I maximize my amount of time for that benefit. So, instead of timing the market, I'm getting more time in the market, I'm getting the tax efficiency. As per normal, I buy my own fund, the Maximum Return Fund. And the reason I do that is because it gives me a high degree of flexibility. It's a worldwide fund, so it can invest in South Africa, and it can invest offshore. It's multi-asset. So, it's not always trapped permanently in equity, it can come out, it can look for other assets. In an environment like this, for instance, you know, you get some inflation benefits from commodities. So, rare earth metals is an investment that the fund has. So, not crystal clear advice in these challenging times, but at least a plan that I can work with.

03:23

Look forward to catching up next week. I hope you enjoyed this perspective.

Introduction
The impact of the Russian war in Ukraine on markets
Examples of the unintended consequences of politics for markets
The importance of going back to a plan in a time of uncertainty