Robert Cowen Investments was started in 1982 by Robert Cowen in order to manage private client assets, and is now positioned as a niche investment house, specializing in family wealth management. Robert Cowen Investments prides itself on being able to provide a comprehensive investment, administration and accounting service with a great deal of emphasis on personal service.
The biggest news this month came out of the FED and the possibility of a rate cut by year end. This is a swift change to the hawkish actions taken over the last several years and is a concern because it implies they are worried about US economic growth. Combine that with a consequential decline in earnings and this should be very poor for US equities, so why then is the S&P500 index trading at all-time highs?
On the flip side the FED’s dovishness also implies rates are likely to remain low for the foreseeable future. Thus companies can keep the status quo and continue to gear up their balance sheets; buy back shares and hopefully invest in their own businesses. All great news for shareholders. This is particularly welcome during the current period of uncertainty surrounding trade tariffs and their impact on global growth.
The major concern with this stimulus is if it doesn’t lead to expansion, healthy inflation and normal rates before the next recession there would be very little stimulus available to the FED over the near term if cracks form in the US economy. However, they can still go the way of Switzerland and Japan and introduce negative rates and another round of quantitative easing. Only time will tell if they can stimulate the economy enough to keep it from stalling but for now we remain invested in equities whilst the alternative of holding cash or bonds is even less appealing.
RCI BCI Flexible Fund closed June at 360.5c, up 1.45% for the month and up 7.96% for the year to date. Domestically, the State of the Nation Address (SONA) was judged as hitting the right notes (more money for Eskom and reaffirming the independence of the reserve bank). However, for our part, we were underwhelmed by the absence of detail on the thorny issue of “how” many of the long-term aspirations would be achieved. As is often the case, however, SA equities took their lead from developments offshore. After May’s correction, global equity markets recovered strongly in June. Investors became increasingly confident that central banks stand ready to respond to weakening economic growth with rate cuts and further economic stimulus if necessary. This proved to be a particularly strong month for commodity prices, leading to mining shares continuing to set the pace for SA equities. The rand, which strengthened 3.5% against the US dollar, countered some of the strength in rand hedge shares, while anxiety about the next round of results for SA-focused stocks in light of SA’s economic malaise so far this year was also a drag. In aggregate though, SA equities ended the first half on a positive note and have chalked up a total return of 6.7% so far this year.
RCI BCI Worldwide Flex closed June at 121.11c, up 0.52% (4.17% in USD) for the month and up 12.58% for the year to date. The fund was negatively impacted by the rand strengthening 3.50% against the USD. In addition, the positive momentum in global equities since the start of 2019 resumed in June with the MSCI World Index delivering a US dollar total return of 6.46% for the month.
The primary areas for investment were equities, bonds and cash in the South African markets. Our focus was to invest in shares listed on the Johannesburg Stock Exchange unless clients had a need for income. Equities have been the only asset class to outperform inflation on a long-term basis.
Individuals have been allowed to send ever increasing capital sums offshore in the form of exchange control allowances, and portfolio managers have been able to send 30% of assets under management offshore in the form of asset swaps. This has enabled the South African investing public to participate not only in South African investments but also in investments of a global nature.
Depending on the individual’s circumstances, we recommend that an appropriate amount be transferred offshore and that the client keeps what is required locally to fund the individual’s chosen lifestyle, subject to exchange control regulations in force.