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Coming To Terms With Trump

There is clearly unhappiness with the liberal global economic order that has been in place since the fall of the Berlin Wall in 1989.

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By Dave Mohr, Chief Investment Strategist, and Izak Odendaal, Investment Strategist at Old Mutual Multi Managers (OMMM).

Monday’s rare supermoon – where the moon will be the closest to the earth at any point between 1948 and 2034 – appears to be the apt metaphor for this year’s string of unlikely events. Some will say it started when the odds on Leicester City winning the English Premier League went from 5000/1 to 1/5 in May.

Then Brexit happened, the United Kingdom’s withdrawal from the European Union membership, followed by Donald Trump’s election as president of the United States.

As unlikely as his candidacy seemed a year ago, he clearly tapped into some of the same anti-immigration, anti-globalisation and anti-establishment discontent that drove the Brexit vote.

It is ironic, since the UK and US economies have outperformed most other developed countries since 2009, and have relatively low unemployment. Crucially, though, both have higher income inequality. Looming elections in Europe – Italy, Austria, the Netherlands, France and Germany –will have key votes over the next 11 months, and these will now draw much closer scrutiny.

Related: Trump Win Highlights New, Populist-led Era Says Old Mutual Investment Group

There is clearly unhappiness with the liberal global economic order that has been in place since the fall of the Berlin Wall in 1989.

Limited market fall-out so far

Despite being a shock, the Brexit vote had little lasting impact on markets (apart from the pound, which remains very weak). As it became clear during the night that Trump would win, the immediate market reaction was a sell-off on Asian equity markets, a plunge in the Mexican peso (Mexico is heavily reliant on free-trade access to the US economy), and falling US equity futures.

However, by the end of the day US equities closed higher, reversing the early losses. The following day, Asian equities rebounded sharply. As with Brexit, this cautions against a knee-jerk reaction to unexpected events. Few predicted a Trump win, but those who did warned of a market correction.

This hasn’t happened, and illustrates why it is so difficult to build portfolios around specific events where the outcome is uncertain even if the timing is known (elections, referenda, ratings announcements). Sensibly diversified portfolios are still better than concentrated fearful ones.

The US is of course a much bigger economy than the UK, and what happens there truly has global implications. Trump’s campaign promises to block immigration and tear up trade agreements would be negative for the US and the global economy. On the plus side, he also promised to upgrade US infrastructure. US government infrastructure spending as a percentage of gross domestic product is close to a 60-year low.

By the end of the week, US and other developed equity markets were up strongly. The equity market is therefore pricing in a stronger economy and more business-friendly economy (with lower taxes and less regulation) under a Trump presidency.

However,  the longer-term implications are unknown until we have a better idea of what his policy proposals are and if he will get backing in Congress.

Related: Mitigating Currency Exchange Risk For International Businesses in South Africa

Fed outlook

As far as the global economy and markets are concerned, the most important building in Washington, D.C  for now is not the White House but the Federal Reserve’s Eccles building four blocks to the South West.

Aggressive interest rate hikes are much more likely to cause a US recession and deep bear market than Trump’s policy changes. The likelihood of a rate hike in December implied by futures markets fell from 80% to 50% on the election news, but have risen since.

Barring a change in the underlying economic reality, the Fed is still expected to hike interest rates gradually without upsetting the markets or the economy.

Since the Trump campaign attacked the Fed for its failure to raise rates, the longer-term outlook is unsure. However, the Fed is an independent institution with a mandate from Congress to achieve stable prices and full employment. Also, Janet Yellen will stay on as Chair until 2018 and will remain a board member until 2024.

Therefore, abrupt monetary policy changes are unlikely, but it does appear that there might be a shift in emphasis away from using low interest rates to stimulate the economy to using fiscal policy (tax cuts and government spending).

This would be welcome and is exactly what many prominent economists were calling for (ironically, most of them were also stridently anti-Trump). However, it also implies more government borrowing and potentially higher inflation and therefore upward pressure on bond yields.

This is clearly what the market sees: The US 10-year treasury yield rose above 2% for the first time since January. However, this could be an overreaction, since no-one knows exactly what Trump’s plans are yet.

Related: 5 Reasons Why The Krugerrand Is The Perfect Investment For You

What does all this mean for us in South Africa?

To continue with our metaphor, the supermoon is expected to result in extreme tides. As much as we grapple currently with political uncertainty and the fall-out from policy own goals, South Africa’s history also points to the influence of big global tides on our economic shores, specifically on commodity prices, sentiment towards emerging markets and global capital flows.

Typically the risk is always there that the heavily traded rand sells off with negative consequences for the local inflation and interest rate outlook. The rand lost 5% against a US dollar that firmed against most currencies. However, the rand had strengthened quite a bit prior to the election.

On the positive side for the rand, commodity prices have firmed up this year as China’s economy seems to have picked up some speed (with the key manufacturing gauge in positive territory again).

There are concerns that the US could hike tariffs on Chinese imports, but starting a trade war with the world’s second largest economy would be an extreme move even for Trump.

China can also hardly be called a currency manipulator when the falling yuan is accompanied by falling, rather than rising, foreign exchange reserves. It is clearly capital flows rather than government buying of dollars that has pushed the yuan to a six-year low.

More infrastructure spending in the US could also be positive for commodities. Trump has promised to dial back America’s commitment to fighting climate change, which is supportive of coal and energy producers, but obviously bad news for the environment.

However, sentiment towards emerging markets has taken a knock, given their general reliance on trade. South Africa’s preferential access to the US market under the African Growth and Opportunity Act (AGOA) was recently secured until 2025.

No African country makes it into the top 30 list of US trading partners and there is no reason to expect any anti-trade backlash against AGOA.

Moreover, while the US is an important export market for us, South Africa exported more to the BLNS countries (Botswana, Lesotho, Namibia and Swaziland) than to America in 2015. China was our single biggest export destination. However, other emerging markets are very dependent on exporting to the US.

Finally, capital flows are greatly influenced by the risk-free rate – if US Treasury yields rise further, it could place pressure on the rand and local rates, and higher yielding emerging market assets in general. However, if US yields are rising on hopes of faster growth, that would also be a good sign for the global economy.

Chart 1: Impact on US markets

Chart 1: Impact on US markets

Chart 2: Impact on South African markets

Chart 2: Impact on South African markets

 

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Surge In South Africans Swopping Their Cars For Bitcoin

The cryptocurrency Bitcoin has experienced a seemingly interminable rise. Early adopters have experience lottery-sized pay-outs on minor investments as the currency exploded in value in 2017.

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The cryptocurrency Bitcoin has experienced a seemingly interminable rise. Early adopters have experience lottery-sized pay-outs on minor investments as the currency exploded in value in 2017.

As South Africans are itching to get their hands on the digital currency, there’s been an increase in swops and bitcoin-only sales on Gumtree.co.za, says Claire Cobbledick, Head of Core at Gumtree. “This is particularly true for high-value items like cars, bikes and boats. Many sellers are willing to take a gamble with their assets in hopes of a large pay-out.”

This is on trend with other marketplaces. In the United States a McLaren 720S was put up for sale in exchange for 25 bitcoin, a theoretical value of $425,000.

Related: 11 Things You Need To Know About Bitcoin

While Gumtree does not allow for the sale of bitcoin miners or services, Cobbledick says that customers can exchange goods for bitcoin on the site, but should be fully aware of the risks. “Bitcoin is a volatile currency, so while you could easily see a 50% increase in your investment, you could just as easily end up with nothing. It’s up to the seller to decide if they are willing and able to take a gamble.”

Some cars currently up for sale in exchange for bitcoin includes a Land Rover Defender, BMW X5 and a rare 1970 Mercury Cougar V8.

“There are also a few other sellers accepting bitcoin in exchange for Kruger Rands,” says Cobbledick. “Perhaps proving that gold as a store of value is falling out of vogue.”

But the most unusual swop would have to go to an entrepreneurial seller who is offering carnivorous plants in exchange for the cryptocurrency.

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Zando Sold 80 Items A Minute During Black Friday – By Doing This

Black Friday has brought immense success for numerous local online retailers – reflecting the potential of e-commerce in South Africa. Why not learn from Zando’s success in 2017 to ensure your success during the 2018 Black Friday sales season?

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For South African e-retailers, Black Friday is a big sales event. But you need to ensure you’re prepared for the web traffic and that your e-commerce store can handle the logistics of thousands of orders.

zando-sascha-breussAccording to Zando, they experience 100% up-time during Black Friday and less than a week after the season sales event, 95% of customer orders have already been shipped.

To help fellow e-tailers perform better next year, Zando’s CEO, Sascha Breuss answers some key questions about the company’s preparations and learnings around Black Friday:

1. How did you encourage greater sales on Black Friday?

Over the last few years Black Friday has developed a following in South Africa, so we benefitted from the existing hype around it. We didn’t focus too much on upfront marketing, but put our energy into flawless execution and of course great deals for the customers.

Related: The Evolution Of Retail: From Corner Store To Artificial Intelligence

2. How much planning went into ensuring your store platform ran at optimum?

The real ‘hot phase’ started with the first day of November when our IT department went into a ‘feature freeze’ and we focused 100% on site-stability and scalability.

We went through some intense testing of our site with loads up to 15 times the average daily amount of visitors. So, when the actual day came, we were confident in our systems.

3. How were you able to successfully co-ordinate logistics during Black Friday?

Early preparation and experience from past years have been the key to success. We increased our head count in both Warehouse and Customer Service well in advance so that we could rely on well-trained and experienced colleagues come Black Friday.

4. How did you ensure a seamless experience between your website and your app?

We know that our customers are browsing Zando on all platforms, desktop, mobile and app so we implemented some handy features to make the transition between each platform easier. For example, shared baskets and wish lists are now a feature. Some of the deals however have been app-only and sometimes we reward our app users with early access to shop the best deals. So it is definitely worth it to download our app.

Related: How SA’s Online Retailers Can Cash In On Black Friday Fever

5. How did you scale your entire operation for a single event?

This is easy to summarise in one word – TEAMWORK. The Zando staff did an amazing job and were the backbone of our success. Not only did they put the required extra hours in and worked hard until the job was done, but they also showed real team-spirit. When you called our Customer Service during Black Friday it’s very possible that you spoke to someone in our HR, Social Media or Legal team who helped out answering calls.

6. How did your marketing campaign affect traffic on your platforms?

The most surprising element was probably the high volume of traffic that we saw during the night. Visits started to increase every minute before midnight and during the first two hours of the day we saw peaks that were higher than on our strongest week day. This traffic never dropped with a lot of orders being placed between 2am and 3am on Black Friday.

7. How did your technology systems handle the influx of shopper traffic?

In the build up to Black Friday we added additional server capacity and changed the way we handled the flow of traffic. This made us very flexible to switch on additional capacity wherever required. So it was a combination of intensive preparation, close monitoring and ultimately very little sleep for a couple of days to ensure we monitored our system health 24 hours a day.

8. What was your sales strategy?

For us everything that had a discount of 40%-80%, and was still a relevant and recent look, qualified for Black Friday 2017. Once these criteria were fulfilled we made sure that we had sufficient stock available – in some cases the demand was so high that we brought on additional stock from our suppliers during the Black Friday weekend.

Related: 5 Last-Minute Tips For Small Retailers To Boost Black Friday Sales

9. What were your biggest learnings?

We have been very successful in our approach to remain true to the idea of Black Friday – offering great deals on relevant product and not outdated clearance ranges. The customer is very educated and will identify a good deal, and we have seen consumers’ negative comments on stores who used Black Friday solely as a warehouse clearance opportunity.

10. What surprised you about Zando’s success during Black Friday?

Thanks to extensive preparation we have been able to achieve an uptime of 100% for the full month of November. We also kept the deliveries and returns 100% free regardless of discount or basket size. It seems like our customers appreciated this approach and we have actually seen very positive sales numbers after Black Friday while we expected a drop. I believe the full focus and investment on the Customer Experience has worked for us.

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Team Resolutions: 11 Tips To Uncover Passion And Potential In New Hires

If there’s one resolution HR departments should make this new year, it should be to transform the onboarding experience for new hires.

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If there’s one resolution HR departments should make this new year, it should be to transform the onboarding experience for new hires says Michelle Seko, Talent Acquisition Manger at Sage Africa & Middle East.

The importance of a good candidate experience cannot be underestimated. Research has shown that 88% of job applicants are more likely to buy from a company if they’ve had a positive experience when applying for work there. Research has also shown that candidates talk about their experiences with a company, regardless of whether they got the job. Some candidates would even refer a friend to the company and others will re-apply for a future role, if the experience was a good one.

Research also found that:

Related: Why You Should (Seriously) Stop Hiring People

Win-win

Businesses enter into a relationship with a new hire the moment they sign on the dotted line. And, as with any relationship, it will only flourish if built on trust, respect and a commitment to self-improvement.

When you set new hires up for personal success, the outcomes naturally feed into your business’ success, which means you both win.

Here are a few ideas to get the most out of your new hires:

Make them feel welcome

Introduce them to the people they’ll be working with as soon as possible so that they immediately feel part of a team. At Sage, we partner new hires with a buddy, or Sage Ambassador, who helps them settle in and meet new people, contributing to the positive on-boarding experience.

Focus on the benefits

Compelling benefits not only attract the best candidates but also boost loyalty and job satisfaction. People are motivated by different things: one person might value flexi-time while another could place more importance on growth opportunities or bonuses. Focus on the benefits that align with the individual’s values when onboarding.

Set goals early and outline a plan to achieve them

This keeps your team focused, especially if they will be rewarded for achieving their goals.

Assess performance

Monthly, at least. Adjust goals and plans where necessary, reward good performance, introduce new challenges and deal with issues promptly.

Show genuine interest

Regular catch-ups and remembering children’s names, for instance, makes people feel appreciated.

Empower them

Let your new hires apply their knowledge to business challenges and offer training opportunities outside of their comfort zones. Reward ideas that help you do things better and faster.

Related: Hiring The Right Person Is Critical When Growing A Business

Encourage collaboration

People thrive when they can learn from others and when they can share their knowledge. Involve experienced team members in the new hire’s training. This is a great way to recognise and appreciate their loyalty and skills.

Be transparent

Do you have difficult clients? Will the new hire have to work overtime? What are the business’s goals? New hires should know what they’re getting into.

Provide solid training on everything from company culture and benefits, to opportunities for growth

The biggest cost associated with training people is the time it takes for them to become productive. But rushing through on-the-job training could lead to a host of other problems, including repeated mistakes and a lack of confidence.

Openly communicate any changes in the business

Manage your team’s expectations and be clear about yours. Allow new hires to question and understand how you do things and to point out errors – their past experience probably gave them new ideas and ways of working that could boost your team’s efficiency and productivity.

Be upbeat

Your mood sets the tone for everyone else. You can have the best product in the world but unless your team is passionate and enthusiastic about that product, you won’t get the results you’re hoping for.

Keeping people motivated and productive is hard work

But if you provide them with the tools, knowledge and support to do their best work and to contribute their best ideas, motivation and productivity will come naturally.

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