Politics continue to dominate 2024 as elections kick off across the globe. In India, Modi’s party was forced into coalition politics, while Mexico saw its first female president elected, signifying a continuation of current populist policies. France and UK are on track for turbulent elections as centrists lose control in the former and the latter sees a shift from Conservative to Labour control. In the U.S., the first presidential debate saw Trump’s image improve relative to Biden who performed unconvincingly and poorly. 

On home soil, politics played out like a soap opera culminating in the formation of a Government of National Unity (GNU). Like any vested South African citizen, it is safe to say that I was glued, perhaps compulsively so, as we watched party politics unfold. The big question is whether the two main parties in the GNU, who are so ideologically different, can work together for the good of the country. Only time will tell. My colleague, Patrick Ntshalintshali, explores this in more detail in our key feature article this quarter. Markets responded positively to the prospect of the ANC and DA working together, with the ZAR and bonds experiencing their best performance since “Ramaphoria” (early 2018). However, as the complicated reality of co-governing sets in, the ZAR has already retraced some of its gains. Nevertheless, I am constructive on bonds over the next six months, as global macroeconomic factors take centre stage. The focus will shift back to major central banks embarking on cutting cycles, which I believe will be good for emerging markets.

In the section of this quarter’s commentary, on our current positioning, we explain these views in more detail. Our strategy includes a healthy dose of global exposure combined with local bonds, which I believe is well-balanced and effectively hedges against further local risks, while capitalising on positive global tailwinds.

Our domestic fixed income portfolios remain underweight exposure to state-owned enterprise (SOE) debt as we still grapple with a myriad of issues that have been plaguing these entities. Perpetua’s Sustainability analyst, Nomfundo Mdluli explains our thoughts here in more detail in our ESG feature article this quarter. The world of investing can often remain elusive in concept and terminology-heavy, with fixed income being no different! Therefore, we have re-introduced our Explained series, that we launched as a firm some years back, in this Fixed Income Quarterly Commentary. Our topic for this quarter, is demystifying the world of credit – a material asset class within fixed income.

My parting words: I am proud of the free democratic way we South Africans have been allowed to express ourselves. History has shown that it is not an easy path, yet we continue to demonstrate that it can be done!