An agile investment strategy tuned in to prevalent market dynamics will help investors find the silver lining in a new year where buoyant equity markets, vaccine roll-outs and easing lockdown measures provide the impetus for a level of positivity in investment markets.
The Laurium team favours value stocks, which are sitting at all-time lows on relative value to growth stocks, and expects good earnings growth in S&P 500 companies of around 30%, mainly off poor growth last year. But with the S&P 500 looking fully valued on 22x one year forward earnings, it “expects last year’s winners to underperform the real economy stocks that did not perform last year”.
Laurium co-founder and portfolio manager Murray Winckler said South Africa remains in a tight spot, economically. There is little opportunity for the Reserve Bank on interest rates, given last year’s 300 basis point cut to 3.5%. Inflation is well-contained at about 3%, and it could reach 4% to 4.5% in the next 18 months. He expects the rand to end the year at R15.50 to the dollar, and believes that it could trade as strongly as R14.
Among them, resources have been strong for the last four years and will continue to be so, given expectations that China’s economy is expected to increase to 9% this year from 2% last year.