According to Alexforbes chief economist Mpho Molopyane, 2024 appears set to be another year of uncertainty.

Speaking at an Alexforbes Investments media briefing on economic trends and investment themes for the new year, Molopyane said the uncertainty would be brought about by the full extent of synchronised monetary policy softening.

Given the upward risks to the inflation outlook, she believes central banks will maintain a cautious approach and ease policy rates in the second half of 2024, later than markets currently expect.

However, with the turmoil of 2023 in the rear-view mirror, Molopyane said she is cautiously optimistic about the year ahead.

“In the absence of adverse shocks, it looks like central banks will be able to bring inflation back to target without crashing the global economy – achieving the so-called soft-landing scenario.”

However, Molopyane said uncertainty remained around the extent of the slowdown, as high-interest rates continued to filter through the economy. She said the election-packed world calendar also pointed to another year of uncertainty, with electioneering and election upsets likely to add to market volatility.

“With overall global growth forecast to slow for the third consecutive year and inflation expected to edge closer to central bank targets, we believe policy normalisation will ensue in the second half of the year.”

Molopyane said domestic growth prospects looked promising, with improving self-generation electrical capacity easing the intensity of load-shedding. Continued recovery in investment was also expected to lift growth to 1.2% in 2024, from an estimated 0.6% in 2023.

“Additionally, household consumption will benefit from the continued decline in inflation and lower interest rates, further boosting overall growth,” she said.

Another speaker, Alexforbes deputy chief investment officer Senzo Langa, said that given the possible impending shifts in the global political landscape, it may be fortuitous that large South African fund managers keep a healthy exposure to local assets.

“Favourable valuations are also driving this. However, a higher offshore allocation could be beneficial should there be a global recession.The value offering of offshore investing is a significant focus for the broader local asset management industry.

“Their approach to accessing these offshore markets differs from manager to manager. Some prefer having standalone offshore allocations, while others prefer adopting a multi-management/partnership.

“Finally, some prefer a single manager outsourced arrangement and manage this from within their current South African business.”

He said the average offshore allocation of South African fund managers is 35%.

“However, some managers have opted to utilise the full allocation of 45%. Finally, some managers are still below 30%. This has created a dispersion in performance, with the gap between the best-performing and the worst-performing large balanced managers (in 2023) to be around 8%,” said Langa.

Deputy Alexforbes chief investment officer Lebo Thubusi said that given the volatile market environment, investors will continue looking for alternative sources to generate returns and protect capital, resulting in growth in the global private market and hedge fund spaces.

He said some key trends in the alternatives space over 2024 included a lower correlation to traditional listed markets with exposed hedge fund strategies, leading to longer-term out-performance; private market growth accompanied by a resurgence of private debt; and, the emergence of specialised private equity managers globally.

According to Thubusi, a pivotal theme to look out for locally is the evolution of the South African infrastructure environment.

“There is an opportunity in the current environment to focus on infrastructure-related investments that we believe will have a dual benefit of commercial and social returns,” said Thubusi.

He said in an environment that might see lower growth and potential consolidation, asset managers who are agile, forward-thinking and adept at identifying emerging trends and opportunities are likely to thrive in dynamic environments.

“Despite the uncertainties, there exists potential growth that can be unlocked through strategic and patient investment practices. Investors are encouraged to remain committed to their financial goals.

“Seeking professional financial advice and relying on the expertise of proven asset managers can be instrumental in navigating and maximising returns in what may be considered an uncertain investment environment,” he said.

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