In our regular wrap of the past month’s performance of investment markets, Corion’s David Bacher explains why history may show the past 31 days were a major watershed, with value-driven investments taking over from growth. He unpacks the implications of a Great Rotation, which would help South African equities and resources in particular and drop relative returns from the US’s Big Tech stocks, which have outperformed for some years. Bacher spoke to BizNews editor Alec Hogg.
Sign up for your early morning brew of the BizNews Insider, which will keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30 am on weekdays. Register here.
Join us for BizNews’ first investment-focused conference on Thursday, 12 September, in Hermanus. It will feature top experts like Frans Cronje, Piet Viljoen, and more. Get insights on electricity and exploiting SA’s gas bounty from new and familiar faces. Register here.
Watch here
Listen here
Highlights from the interview
In a recent interview, Alec Hogg and David Bacher from Corion Capital reviewed July’s investment market performance, noting their impressive ability to deliver timely reports. Despite a challenging month for tech stocks like Nvidia, which saw significant declines before a recent rebound, the broader market experienced varied results. Corian’s report adopted an Olympic theme to illustrate market dynamics, highlighting that July was a strong month for South African investors and markets like the UK, driven by currency appreciation and political stability.
The political landscape and its implications for market policies were discussed in the US, particularly in light of Kamala Harris’s rise as a leading Democratic candidate. The impact of past “Trump trades,” which favoured business-friendly policies, was also debated, with some uncertainty about its relevance due to changes in tax rates and high debt levels.
The conversation also covered inflation and interest rates, with the Federal Reserve’s recent actions being likened to a boxing match against inflation. The discussion noted that recent favourable inflation data might signal an end to aggressive rate hikes.
Corion’s report used various Olympic events as metaphors for market trends, including a positive outlook for value shares and non-US investments. Local sectors performed well, particularly resources and financials, while some companies faced challenges. The analysis concluded with a cautious but optimistic view of emerging market trends and the potential for sustained investment shifts.
Edited transcript of the interview
Alec Hogg (00:10.702)
I thought David Bacher and the Corion team cracked it with their timely investment market reports. They’ve surpassed even that today. It’s August 1st, and we’re discussing July’s performance.
Alec Hogg (00:37.07)
David, I’m pleased with my tech investments, given yesterday’s strong performance. Otherwise, July wasn’t great for tech shares like Nvidia. Congrats to your team for a fantastic report in less than 24 hours—truly a new benchmark.
David (01:18.902)
Thanks. We used an Olympic theme to frame the report, which made organizing the data easier. We finished the report this morning, but significant prep work went into it.
Alec Hogg (01:50.649)
Interesting approach. Let’s see how July panned out. Is the report up, David?
David (02:05.226)
Yes, it is.
Alec Hogg (02:14.317)
I missed the bronze in mountain biking but watched the Springboks and Tatjana Smith’s double gold. She’s a tremendous asset to South Africa.
David (02:30.572)
Hopefully, she gets another gold tonight. We’re all patriotic at Corion and will be glued to the TV.
Alec Hogg (02:47.415)
She brought back 66% of South Africa’s medals last time and now 100% of the gold. Let’s hope the Olympics continue to uplift us.
David (03:28.14)
July wasn’t great for big tech. Nvidia, the world’s largest company, was down almost 20% until yesterday but rose 12%. Mega cap shares underperformed due to disappointing earnings and a shift toward smaller caps.
Alec Hogg (04:26.264)
We see Meta and Microsoft’s decline on the screen. Is the tide turning for these stocks?
David (04:42.7)
It’s too early to say. Last month, we predicted a slowdown, and July confirmed that. However, one month of data isn’t definitive. We’re focusing on valuations, hoping for a turnaround as small and mid-caps gain traction.
Alec Hogg (05:24.842)
Let’s break down the month using your Olympic events. What does the 100 meters represent?
David (05:35.372)
The 100 meters represents July’s quick dash in investing. The UK and South Africa outperformed with over 4% gains, while the US and China experienced modest increases. The currency appreciation also favoured South African investors. Both markets have large financial sectors and value shares that performed well.
Alec Hogg (06:48.595)
What about the political changes in the US?
David (06:56.662)
We call this the relay. Kamala Harris’s rise as a leading Democratic candidate has mixed market reactions. Democratic policies might lead to stricter regulations but could support renewable energy and healthcare.
Alec Hogg (07:41.462)
What is the Trump trade, and does it still exist?
David (07:48.576)
The Trump trade, favourable for markets with tax cuts and business-friendly policies, may not hold as tax rates are already low and debt is high. Its impact is unclear now.
Alec Hogg (08:21.343)
Kamala Harris’s rise has made the race closer, with Trump no longer a clear favourite.
David (08:39.5)
It’s going to be an interesting few months. Hopefully, the focus will be on policies rather than insults.
Alec Hogg (09:15.236)
US inflation remains crucial for investors.
David (09:25.964)
We call this boxing. The Fed has been fighting inflation with interest rate hikes, and recent inflation data has been favourable. We think Powell is winning this battle.
Alec Hogg (10:10.565)
Lower interest rates might be on the horizon. Why cycling for your next slide?
David (10:22.188)
We use cycling to symbolize long-term trends. For 15 years, growth shares outperformed value shares, but July showed a shift. We hope this signals a new trend favouring value shares.
Alec Hogg (10:56.966)
It’s more sensible when investing is based on balance sheets and income statements rather than market narratives.
David (11:16.982)
Exactly. We hope the market moves away from being driven by a few big names and returns to fundamental values.
Alec Hogg (11:27.428)
From a South African perspective, property, bonds, and equities all had a good month.
David (11:37.932)
All three asset classes delivered strong returns, each up around 4%. Investors seem more optimistic about South Africa, supported by favourable political outcomes.
Alec Hogg (12:25.541)
It seems asset managers are reassessing the stability of the government of national unity. Is there a change in sentiment?
David (12:59.308)
It’s too early to tell, but the current situation is better than potential alternatives. Investors likely prefer the current state over previous uncertainties.
Alec Hogg (13:37.42)
What about local sector returns?
David (13:46.06)
Resources and financials drove the market, both up over 5%. Resource prices, especially gold, were strong. Financials benefited from positive sentiment and interest rate movements.
Alec Hogg (14:26.244)
The First Round share price has increased significantly. The banks seem to be improving, but there are losers too. What about them?
David (14:58.924)
Among the top 40, Bitverse, Anglo-American, and MTN had notable declines. Bitverse’s fall follows a strong previous month. Anglo-American’s drop came after a bid from BHP and disappointing results. MTN struggled with forex issues in Nigeria.
Alec Hogg (16:13.964)
How did the FTSE perform?
David (16:18.38)
British American Tobacco rose almost 14% due to strong results. Goldfields and Anglo-American also had impressive gains, with 17% and 17.5% increases, respectively.
Alec Hogg (17:21.956)
Anglo-Platinum’s recent rise is promising, especially after its spin-off from Anglo-American.
David (17:59.82)
If fundamentals guide us, July’s data suggests a continued focus on value shares and non-US investments. We’re positioned contrary to popular trends and hope for a new trend.
Alec Hogg (19:01.067)
David Bacher is with Corion Capital, and I’m Alec Hogg from BizNews.
Read also: