The Aeon Balanced Fund was up by 240 bps on a gross return basis for the forth quarter of 2019 and is up 989 bps over a one-year period. The strongest sector for the quarter ended December was Healthcare led by Aspen, Mediclinic and Life Healthcare. Aspen announced a divestment to reduce debt. General Retailers was the weakest sector for the quarter, led by Woolworths, Foschini and Truworths due to a subdued trading environ-ment and poor consumer spend outlook.

Globally, a low interest rate environment and accommodative central bank policies have continued to structurally drive markets. The uncertainty and volatility caused by geopolitical instability has continued to impede market returns. US-China trade concerns remain firmly in investor minds amid a slowing Chinese economy. Markets have become accustomed to Trump’s trade rhetoric, and with strong US employment and good US corporate earn-ings, markets have generally benefited. Investors, however, remain cautious as no firm trade deal is in place, and with the ongoing presidential impeach-ment hearings in the US, concern remains as to when a full trade deal will eventually take place. Encouragingly, Fed Chair, Jerome Powell, indicated in his FOMC statement that rates were likely to remain unchanged for a while unless a significant increase in inflation occurs.

Locally, the domestic environment was unfavourable due to the state of the local economy. Sentiment has continued to be negative as political in-fighting, economic growth obstacles, indebted parastatals and a potential downgrade remain apparent. Sentiment somewhat improved during the quarter following positive news of efforts being made to fight corruption, as well as placing South African Airways (SAA), which has been loss making for years, into business rescue. The Monetary Policy Committee also kept rates unchanged citing a likely Moody’s ratings downgrade as a key factor in their decision. However, pressure remains on government to find ways to halt the country’s fiscal deterioration. Eskom continued with rolling power black outs which has added to continued negative sentiment.

In company news, Aeon Investment Management, as a signatory of the Unit-ed Nations Principles for Responsible Investment (UNPRI) engaged with the Department of Trade and Industry (DTI) and JSE to discuss ways of increasing transparency and accountability. We recently also put through proposals to reduce inequality through transparent reporting of gender pay gaps and pay ratios of entities with more then 50 employees. Given South Africa's history and growing inequality, increased poverty and unemployment, we should not forget the responsibilities that government and business have to effectively improve South Africa's social structure. We hope these proposals are taken heed of by government and implemented into law.

Looking forward, growth expectations for the local economy seem to be de-pendent on global growth and renewed efforts by the elected officials. Glob-ally, inflation and GDP growth will be key to try gauge the timing and level of monetary policies. Astute stock picking with our Growth at Reasonable Price (GARP) philosophy that delivers superior value through the cycle and a focus on companies whose cash flows support earnings should stand us in good stead moving forward.