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Hello everyone, my name is Carl Chetty, portfolio manager at INN8 Invest.  

Welcome to our November ’22 monthly update, our final update for the year. November was another strong month for both equity and bond markets globally. The month began with the US Federal Reserve increasing rates for a fourth consecutive time by an expected 75 basis points with chairman Jerome Powell indicating in his speech that rates are likely to continue going up in the fight against inflation.

This hawkish tone initially rattled markets, but markets quickly shifted from pessimism to optimism when the US inflation print came in at 7.9%, which was slightly below expectations. Markets interpreted this as a sign that rates may not need to go up by as much or as fast as initially expected.

Other key drivers of markets in the month was an expectation that China would ease their zero COVID policy as well as some seemingly positive discussions between presidents Xi Jinping and Joe Biden at the G20 summit meeting. This, combined with a relatively positive US inflation print, resulted in a very strong rally in both equity and bond markets across the world, as well as a significant depreciation of the US dollar against most other currencies. Unfortunately for South African investors, this dollar depreciation resulted in flat or negative returns from global asset classes in rand terms.

Local equity markets, as measured by the capped swix index, were up an impressive 10% in the month with the resources and industrials being the winners. The most significant contributor at a stock level was Nasper’s Prosus, which was up close to 40% on the back of some positive news from China.

Looking at the performance of your portfolios, the flexible income high growth and flexible growth models outperformed their peer relative benchmarks in the month. The stable growth and moderate growth portfolios marginally underperformed, mostly on the back of underperformance from Ninety One cautious managed fund, which was hurt by a large, overweight position in offshore assets. On a one year basis, however, all five portfolios are well ahead of their benchmarks.

To look at some of the key drivers of portfolio returns in the month, Coronation Strategic Income Fund, which we use in the flexible income portfolio, delivered a return of more than 1.5% on the back of its overweight position in longer-dated fixed rate bonds as well as an overweight position in SA listed property, which also did well.

M&G inflation plus, 1nvest high equity, Fairtree balanced, and Laurium flexible funds all did well in the back of overweight positions in local equity and underweight positions in global equities.

The returns of 1nvest high equity and Fairtree balanced were further boosted by overweight positions in Nasper’s Prosus relative to peer funds, while the returns of M&G inflation plus also benefited from an overweight position in resource stocks.

Looking ahead, we still see higher levels of uncertainty going into 2023, which will likely come with further market volatility. There are still many question marks over the extent by which inflation will moderate the path of interest rates and the impact of this on global growth and company earnings. 

So, we see the potential for further downside, but 2023 could also offer excellent returns should the macro environment improve. So rather than trying to time the market, it is better to stay invested and ensure your portfolios are sufficiently diversified across asset classes, sectors, countries and currencies, investment styles and managers.

That’s it from us for now. Thank you for all your support this year. We wish you a restful and joyful festive season spent with family and friends. Take care.