Following Donald Trump’s shock win in the US elections, the world’s attention has shifted to what extent his proposed policies will be implemented and the implications for global markets.
This is according to Peter Brooke, Head of Old Mutual Investment Group’s MacroSolutions boutique, who believes that the world is entering a new, populist-led era, meaning a pull back from globalisation and a move towards more isolationist policies.
“From a financial markets perspective, Clinton was always the favourite as she represented the status quo – and markets like that certainty,” says Brooke. “Trump’s policies were less certain and as a result we expected a sell off following his win. A Trump win was predicted as being negative for trade and particularly bad for emerging markets, which are leveraged for trade.”
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Brooke believes that political shocks have become the new driver of volatility in the investment universe. “Of the major surprises in the last year, including Brexit, the Trump victory has been the most extraordinary,” he says. “His surprising landslide victory highlights the very strong desire for change and the inability of the elite to gauge the political climate,” adds Brooke.
“All around the world, populists are gaining on both the left and right. We believe this is a lagged impact of the global financial crisis which has resulted in very soggy global growth and rising inequality as central bank stimulus has helped the rich,” he says.
“We don’t think this trend is over and expect continued political uncertainty, moving to Europe as they start their calendar of elections.”
Brooke adds that a move away from globalisation and towards isolationist policies is bad for trade. “This hampers global growth and we expect the world to remain trapped in limbo with low growth, low rates and low returns,” he says.
Old Mutual Investment Group Chief Economist, Rian le Roux, highlights the short-term implications following the Trump election victory. “The presidential outcome has already had a negative impact on a number of emerging markets currencies – with Mexico being the worst hit – and those that could be affected by tighter US trade policies.”
However, the market probability of a US Fed hike in December has slumped to below 50 percent and the global search for yield may be strengthened in the short term, says le Roux.
“The rand is a high-beta currency, which means that it tends to be more sensitive to any moves against the dollar than other currencies, and this is likely to play out over the short term,” says le Roux.
“But, higher precious metal prices should provide some counter pressure.”
Still, le Roux adds that over the medium term the biggest risk to SA and the rand is if US fiscal becomes notably more expansionary it might lead to a more aggressive pace of rate hikes by the Fed, resulting in a stronger dollar, downward pressure on commodity prices and, hence, a weaker rand.
When it comes to US policy direction, le Roux highlights Trump’s position on fiscal expansion and tougher trade policies. “Promises are one thing, but actual implementation is quite another,” he says.
“What Trump will and can actually do remains to be seen. The global macro-economic impact is still unclear, including what this presidency will mean for growth, inflation and global policy settings over the longer term. But, the dust will settle over the next few weeks and comments from elected President Trump in the interim will hopefully provide some more clarity.”
Brooke points out that the threat of a demise of the European Union due to the rise in populist views, further propped up by the Trump win, will continue to be a market concern, causing ongoing volatility. “The Eurozone has a massive impact on the global trade market and any threat to this region will have far reaching market consequences.”
Says Le Roux: “Despite the increased uncertainty and hit to the rand overnight, our views on South Africa’s growth and inflation outlook remains largely unchanged. We still believe that inflation will soon peak and then fall in 2017, with rate cuts a possibility from around the middle of 2017.”
Brooke concludes by highlighting that the first step is not to panic. “Brexit taught us that buying shares in the initial sell off is a good strategy, as the market initially overreacts, and that investors should not believe forecasts, illustrated by the weak markets going into the election,” he explains.
“Unintended consequences have been an important lesson here – as political uncertainty grows in the developed world, emerging markets don’t reflect as badly on a relative basis. With the gold price rising and the oil price falling, South Africa has actually received a small boost.”
Off The Beaten Track
What Tourism Month means in South Africa and how Mango Airlines is focusing on local opportunities.
This September, being Tourism Month, we have so much to talk about in South Africa, and so many people to engage with, both domestically and abroad. We are privileged to be able to leverage a broad range of destinations – arguably world-class in nature, and they expand way beyond a beautiful mountain, and an ecosystem of game.
The vast majority of leisure tourists, however, remain attracted to the Mother City and various Safari destination, while business tourists tend to stick to hub cities for short durations of time before departing again.
“There is a golden opportunity to expand on the same offerings – while not detracting from them in any way. Our responsibility is to drive tourism into new areas, really emphasising the differentiators that are incredibly attractive to local and international tourists,” said Benediction Zubane, Head of Marketing at Mango Airlines.
“Often tourists visit one of the more well-known sites in an area, and are completely unaware of the other features and destinations close by. We’re seeing a lot of success in township tourism which goes to show how diversifying can really drive new tourism opportunities,” explained Zubane.
According to Statistics South Africa survey on Tourism and Migration, nearly 3.5 million international travellers visited South Africa in August 2017. Top numbers were tourists from USA, UK, Germany, France and The Netherlands, with African visitors primarily coming from SADC countries. Zubane added, “This means there is vast opportunity to begin engaging with travellers in new countries across the globe. We need to become our own best ambassador, talking-up our famous and lesser known destinations, proudly showcases our uniqueness. We should also be tourists in our own country and start exploring the wonders of the Rainbow Nation.”
Mango is passionate about helping its SMEs and entrepreneurial community to successfully overcome the unique challenges facing the tourism industry: “There has never been a more opportune time for small businesses and entrepreneurs to benefit positively from tourism in South Africa, and we hope to celebrate alongside our SME community as they fly high – both literally and figuratively,” he concludes.
FNB Receives 50 Million US-Dollars To Accelerate SME Development
First National Bank puts their focus on SME development in South Africa.
First National Bank (FNB) has received 50 million US-dollars from the DEG – Deutsche Investitions- und Entwicklungsgesellschaft to deploy towards small and medium enterprise (SME) development in South Africa.
DEG is a development finance institution whose mission is to promote private-sector enterprises in developing and emerging-market countries as a contribution to sustainable growth and improved living conditions.
Mike Vacy-Lyle, CEO of FNB Business says: “The new line of funding contributes to our ongoing efforts to accelerate our contribution to SME development in South Africa. We believe that SMEs are key to stimulating sustainable economic growth and job creation. Our intervention in SME development is not only limited to funding, we also invest heavily to improve capacity and supplier development capabilities in small businesses.”
FNB continues to pioneer products and services that have taken the angst out of South Africa’s entrepreneurs, from providing free instant accounting services to online documents reservation services, and forming public-private partnerships to digitise the registration of businesses.
“Our message to entrepreneurs is that we remain committed to providing meaningful solutions to help them grow. We have exciting developments that will take us further in our journey, all aimed at advancing the SME agenda by taking the anguish out of doing business,” concludes Vacy-Lyle.
A Conversation With Yourself Could Change Your Life
Thami Buti is a 24-year-old South African actor. He is amongst the 46% of South Africans between 20 and 50 years, who have no savings at all. He’s probably one of 90% of people who will retire with less than 50% of their income.
Except none of this is true for Thami, because he’s had a conversation with himself – at six different ages – in Sanlam’s new educational campaign.
In Sanlam’s Conversations with Yourself campaign, Thami gets transformed into a 20, 30, 50, 65 and 80-year-old (actor Hlumelo Mzimkulu plays the 10-year-old) called YOU. And over a series of conversations, these characters in their different age brackets sit and share wisdom on life’s ‘what ifs.’ Disrupting the traditional approach to ‘finance talk’, the central idea is this: what if you could learn everything you need to know about life, from yourself? What if 65 year-old you could tell you – at age 20 – to stop buying so many cappuccinos and to invest more into an RA? And 30-year-old you could ask you at 80 how many kids you have – and how you afford to give them the lifestyle and opportunities you want for them?
Sonja Sanders, Head of Marketing and Client Experience at Sanlam Personal Finance, says each of the seven Conversations with Yourself films uses humour and insight to broach a different topic – and presents the accompanying product solve. “For example, the Conversation on Life and Retirement tackles retirement in a completely new way. Planning for retirement is often not a priority when you’re young. But what if you knew only 6% of South Africans are able to cover their monthly expenses once they retire? And what if you could ask your 65-year-old self whether you are one of the 6%? Would 20-year-old you still take that year off? Would you at age 30 still buy that flashy car?”
Using banter to bring home the fact that today’s decisions will define life when you’re older, the script takes a notoriously low-interest topic and makes it relatable.
The same goes for the highly sensitive topic of death, which no one wants to talk about — undoubtedly a problem in a country with an average age of death that stands at 64 years, and where 40% of the workforce is more likely to have cell phone insurance than life insurance.
Sanders says, “Conversations with Yourself takes an idea we’ve all had to the next level: The wish to fast-track into the future to see if our lives worked out the way we expected. Ultimately, you are your own partner in life. Everything you do now either benefits your future or jeopardises it. It’s often too daunting to imagine one’s future-self. But Conversations with Yourself connects the future to the present, and makes the experience real and impactful.”
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South Africa’s problematic savings culture has been well documented. In the retirement space, Sanlam’s Benchmark research has identified millennials as the generation most at risk of having insufficient savings, mainly due to their DIY approach to money matters, their mistrust of financial service institutions and the fact that they don’t identify with retirement as a goal. It’s a generation known for overconfidence despite their poor financial literacy. Millennials prefer self-directed advice – so what better way to deliver it than through a ‘conversation with yourself’?
“As WealthsmithsTM, Sanlam wants to empower people with the knowledge and tools to enable them to make positive financial decisions today. This should set them up for success both now and into the future. Conversations with Yourself helps people to appreciate that the planning they do today has significant implications for their future self. Ultimately, the campaign uses progressive storytelling to share a story to which any generation can relate. The story of you,” concludes Sanders.
Visit Conversationswithyourself to watch the films and start your own conversation.
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