It’s been a whirlwind start to the year. Locally, the major themes were a Ramaphoria-powered rally in SA-flavoured risk assets, a severe selloff in property stocks (-20% at property index level), centred around fears of another major corporate fraud and a correction in JSE-listed heavyweights like Naspers and British American Tobacco, albeit for very different reasons. Our generally soft economy and strong Rand have combined to pull CPI inflation down to 4% forcing the SARB to cut short rates, but they accompanied this with a surprisingly hawkish statement. US markets started the year off still cheering the tax cuts signed into law in late December, but then we saw a “flash crash” that was catalyzed by higher US wage inflation and exacerbated by too many market participants betting that volatility would stay low, or grind lower. Although this was a technically-induced event, it was a significant one as it sparked a change in global markets’ animal spirits out of pure greed mode into a healthier appraisal of risks. As absolute return investors we regard this as a regime shift and it is key to how we walk the risk-return tightrope. The other major global events have included a selloff in technology shares with the Facebook data scandal prompting investors to mark down their expectations for firms like Naspers, disappointing economic data (relative to expectations) in Europe and trade war fears courtesy of Mr Trump’s negotiating style. Cutting across all of the above, the US Fed has continued to gradually remove the punchbowl, both in terms of raising short term interest rates and outright quantitative tightening. Markets are battling to digest the fact that the party seems to be nearing its inevitable end and the fact that there is a new Fed Chair adds an additional unknown.

Risks have increased, and the markets are now much more alive to them. However, markets were overdue a pause and there are many parts of the globe where underlying activity levels remain healthy, so the change in participants’ risk perceptions shouldn’t be seen as bearish, yet. Given the new risk regime, and the long awaited increase in volatility we are now more circumspect in the way we are taking risk, and are also mindful that the rate of change of global cyclical expansion has slowed.

STANLIB Moderate Fund of Funds, STANLIB Inflation Plus 3% Fund, STANLIB Balanced Trustees FoF, STANLIB Moderately Conservative FoF have closed and amalgamated into STANLIB Absolute Plus Fund with effect from 23 March 2018.