The Fairtree MET Flexible Balanced Fund will change it's name to Fairtree Flexible Balanced Prescient Fund, effective from 16 May 2017

The fund changed sectors from South African--Multi Asset--High Equity to South African--Multi Asset--Medium Equity on 24 May 2017

The market continued to grind higher over December as the outlook for global growth improved on the back of expectations of increased fiscal spending by the US. The market has also been boosted by improving economic data from the US, Europe and China. Global reflation momentum has had a positive effect on risk assets. It's important to note that the positive momentum has started before Trump's election as US president, but it certainly accelerated as his policies around increased fiscal spending, reduced taxes and less financial regulation boosted confidence along with the outlook for increased business investment and productivity.

The US Fed hiked rates by 0.25% as expected and guided to market to pencil in at least two rate hikes in 2 017 on the back of improving growth and rising inflation. The Fed also said that the full impact of Trump's policies remains very uncertain. Fiscal policy has taken over the baton from monetary policy as the primary driver of growth. The next few months will be key to watch as the Trump administration set out the size, timing and structure around its fiscal policies. There is scope for disappointment given that the market have already priced in a significant degree of easing.

Developed market yields have improved over the last three months causing bonds to underperform. The global bond market will remain volatile and may improve over the short term as some of Trump's policies disappoint. However, we believe the asset class will remain under pressure as inflationary pressures continue to build. In the US wages have increased and headline inflation surprised to the upside in Europe.

Economic data out of Europe continued to surprise to the upside. The ECB, who took the decision to extend its asset purchase program until the end of the 20 17, but at a slightly lower pace, may have to taper future asset purchases. Europe continue to benefit from a weak currency and low interest rates, but the political environment will turn more challenging towards the second half of the year as the Netherland, France and Germany face elections. In the UK the debate and negotiations around Brexit is likely to warm up and may add to volatility during the northern spring and summer months.

China has also been a key focus. Manufacturing data has been strong and the economy has grown faster than expected over the second half of last year. However, sign that the property market is in bubble territory and corporate leverage continue to increase at a rapid pace will pressure authorities to tighten monetary conditions over the year. Fiscal policy should remain accommodative. China will also have to deal with a shift in US trade policies which may cause some turbulence for emerging markets.

Given the importance of commodities to the SA economy, the Chinese economy and trade relationships with the US will be two key external factors to watch. The domestic growth outlook continues to improve as drought conditions have eased and the scope for further interest rate hikes diminished. The stronger commodity complex should boost economic activity along with the Rand.

Equities: The outlook for global earnings growth has improved along with the outlook for global growth. Concerns about deflation subsided while expectations for fiscal policies to play a larger role globally strengthened. The reflationary outlook created positive sentiment around cyclical and value orientated stocks, while the increase in bond yields have put pressure on high valuation defensive names. We believe South Africa will follow global equity markets higher as domestic economic activity improves over the next 12 months. The uncertain political environment and a potential policy mistake by the US Federal Reserve remain key risks. We favour cyclical companies with global earnings growth potential and companies with the ability to generate cash sustainably.

Fixed Income: South Africa's inflation will improve materially over the next 1 2 months as food prices fall, the currency remain strong and growth remain slow. However, risks of a weaker ZAR, credit ratings downgrade and Fed hikes should keep the SARB in pause mode for a prolonged period. The focus on the search for yield by global investors and potential reduction in political risk premium over 2 017 will continue to support lower bond yields.

Currency: The US dollar strengthened in response to expectation of faster rate hikes by the Fed. We believe the US dollar will remain strong, but significant upside is capped over the medium term. We continue to view the Rand as slightly undervalued, but scope for further meaningful appreciation given the current political environment and potential US Fed rate hikes are limited

Alternatives: The combination of low global growth, increased asset class volatility and low equity returns have increased dispersion in and amongst asset classes. In an environment where the outlook for traditional asset class returns remain benign we favour alternatives as an asset class.