The Aeon Balanced Prescient Fund underperformed its benchmark by 48 bps for the third quarter of 2018 and is underperforming its benchmark by 400 bps over a one-year period on a net return basis.

The strongest sector for the third quarter ended September was Resources as Sasol, Anglo American and BHP Billiton benefited off the back of positive global news and a stronger oil price. Healthcare was the weakest sector as a negative surprise from Aspen coupled with an uncertain global and local regulatory outlook weighed on counters.

Globally, market volatility and uncertainty remained the major theme. Geopolitical risk has increased substantially. The global trade war narrative has continued to plague the head-lines. Trump’s trade wars against an ever-increasing amount of nations remains an ongoing concern for investors. This is not being aided by comments from Trump threatening a with-drawal from the World Trade Organisation. Emerging market currencies such as the Rand have been under pressure this year and this is especially so given the decreasing economic GDP growth projections of South Africa. This is expected to continue as Fed hike rates are expected at an increasing rate going forward. All this results in negative market sentiment and a risk-off mentality and this can be seen in the volatile market returns.

Locally, the market has been at the mercy of these international events. Local politics has not helped the matter. Issues with land reform, mining charter uncertainty, unemployment worsening, and wage negotiations are all still on-going. High positive expectations on the change in leadership have been priced in but leadership battles continue within the ANC in the run up to the national elections in May 2019. The original positive momentum has dwin-dled as hard policy changes have yet to be made and implemented. Furthermore, South Africa entered a technical recession as GDP fell for two consecutive quarters. This coupled with SA’s lack of fiscal options may weigh on rating’s agencies metrics.

Local corporate events didn’t help lift sentiment. China have proposed limits on children’s online gaming activities, which saw Tencent and its shareholder Naspers fall sharply post the announcement. Many "market darlings" became "fallen angels" as company results missed market expectations and provided a cautious forward outlook. Further negative sentiment from foreigners gained traction weighing on the markets and increasing broad market losses.

Looking forward, the optimistic growth expectations set for the local economy seem to be disappointing. Real actions have been taken, but more certainty in policies needs to be ac-complished. Globally, inflation and GDP numbers will be key to try gauge the timing and level of tighter monetary policies. All this leads to further uncertainty in the global markets. We have seen pockets of opportunity begin to surface and monitor these closely. Astute stock picking that delivers superior value through the cycle and companies whose cash flows support earnings tend to outperform the market.