Long Term Investors Maintain Allocation To Quality Stocks

My Image
My Image
My Image
My Image
My Image

Indices retraced slightly last week as we enter a mini-cycle similar to 2015, the long term picture remains bullish. As the chart above shows defensive sectors have outperformed cyclical sectors while at the same time exhibiting lower volatility on a one year basis. This ‘anomaly’ is on account of short term investors turning bearish while long term investors maintain their allocations. The exceptions are Technology, a secular growth story and Discretionary, a sector where short and long term fundamentals remain relatively strong.


IHS Markit’s estimates of US manufacturing PMI has been soft and last week’s data of 50.6 is at a decade low due to weaker demand. This tallies with a negative performance of the Industrial sector ETF in spite of a 17% level of annualized volatility.


Similarly, the reduction in input costs despite tariff uncertainties, led to a decrease in output charges. Again this tallies with the fall in value of the Energy and Materials sector ETFs. These are transitory factors, which provide an opportunity to allocate on dips, but is also popular trade judging by the soft declines of blue chip counters like Microsoft, Nike, Visa or LVMH currently as investors resort to buying quality stocks in spite of higher prices.


Longer term data remains bullish as consumer sentiment is at a 15 year high, wage growth is at cyclical highs, the unemployment rate is at a 50 year low and estimate for GDP growth is some 2.6% for this quarter and 2.4% for the calendar year.


European data remains soft as the bloc faces headwinds from a slow-down in the Chinese economy mainly as a result of trade sanctions. In China industrial production, fixed asset investments, retail sales, exports and loan growth have declined sequentially and may affect the pace of recovery of the Eurozone

PWM is a boutique wealth management company in South Africa providing bespoke investment services to affluent individuals

We provide independent, expert advice on local and offshore investment funds, portfolios and structures. We have access to a vast, customizable range of investment options from across the global market. As a result clients benefit by receiving the most appropriate advice and solutions for their varying and specific needs. Our business operates within a highly regulated environment therefore ensuring that the highest professional standards are maintained while keeping the best interests of our clients in mind. For this reason systems have been put in place to ensure full compliance with all regulatory requirements.

Disclaimer: The research report has been prepared for information purposes and does not constitute an offer. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and the company accepts no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this report.

27 May 2019 

My Image
My Image

Short Term Headwinds Emerge But The Long Term Outlook Is Intact

My Image
My Image

Dip Buyers Patiently Await Another Opportunity