2018/12/19 00:00:00

A decent rally in global markets took place as November was nearing a conclusion. Prior to this, markets flip flopped with no clear direction as the US tech sector initially sold off and then recovered strongly when bargain hunting entered markets and the US Federal Reserve hinted that US interest rates were near the neutral rate. The tech heavy Nasdaq index, which was down over -5% at one point, ended 0.34% up in November, whilst the S&P500 index rose by 1.79% over the same period. Brexit negotiations continued to weigh on the UK and the EU. After eventually managing to strike a deal, UK Prime Minister Theresa May now faces a Herculean task of getting the deal through the House of Commons, who are set to vote on the agreement on the 11th of December. European markets hence struggled with the DAX and FTSE100 indices giving back -1.66% and -2.07% respectively. Amidst the geopolitical uncertainty, the MSCI Emerging Market index (+4.06%) outperformed the MSCI World index (+0.96%).
On the home front, the South African Reserve Bank hiked interest rates by 0.25%, which caught markets off guard to some degree considering the desperate need for growth domestically. Meanwhile, another cabinet reshuffle took place as tempers flared at the Zondo commission of state capture, which hints at a bumpy ride till next year's national election. The JSE All Share index decoupled from global markets by losing -3.17% in what was a tough month. Bonds rallied with the All Bond index adding 3.87% in November. However, Brent crude oil was the laggard as severe selling pressure, on the back of a diminished global growth outlook, saw a -20.75% collapse in price to end at USD59.14/bbl.The South African rand strengthened considerably moving from 14.78 to 13.86 to the dollar over the month, thus impacting South African investors by -6.23%.
Contributors to performance: The Fund performed much in line with the MSCI World (not including emerging markets) benchmark with a performance of 0.3% for the month. Three stocks in the portfolio generated large positive gains with Abbvie (21.09%), Applied Materials (14.03%) and Caterpillar Inc (11.83%) giving strong performance.
Detractors from performance: Underperformance was driven mostly by US and European stocks in the information technology sector once again. Nvidia continued to exhibit negative performance (-22.40%) with concerns relating to higher than expected inventories due to less uptake on graphics cards in the crypto-mining space. Target (-14.36%) and Credit Suisse (-10.31%) also disappointed. Team analysis suggests that Target and Credit Suisse no longer offer relative value to peers and have been sold out of the portfolio; we believe however that Nvidia still offers solid value and its position has been maintained.