Graviton Capital Clarity 2024 Asset Manager Survey

6 February 2024 | Market Forces

As we gear up for the year ahead, we’ve reached out to some of SA’s leading asset managers for their views on what may lie ahead in 2024. With the world moving fast, we wanted to understand how they see market factors changing, what risks they’re watching, and where they might deploy their capital.

Who we surveyed:

We surveyed 20 South African asset managers, who represent multiple asset classes, philosophies, and styles. Their responses were received between 11 and 16 January 2024.

Participating managers:

Who we surveyed by Graviton perspectives

1. What is your year end range for the USDZAR?

2. What are your views on the following asset classes?

The two asset classes on which managers are most constructive in 2024 are domestic equity and bonds.
One manager is pessimistic about both of those asset classes.
On average, managers seem to be more optimistic about local assets, and are also positive about global emerging markets. The most pessimistic views are held on global developed market equities. It is interesting to note that four managers were not pessimistic about any asset class, while one manager was pessimistic on six asset classes.
Among the optimists, two managers had seven optimistic votes, while one manager was only optimistic on one asset class (domestic bonds).

4. What do you expect from the global economy in 2024?

5. When do you expect the US Federal Reserve to start their rate cutting cycle?

US monetary policy was where we found the widest dispersion in answers.
While all respondents agreed that the US Federal Reserve will reduce interest rates this year, opinions were divided on the timing and magnitude of cuts.

At the time of the survey, the rand/dollar exchange rate was about R18.60/US$.
Most managers believe it may hover around current levels for the year ahead.
Only one manager believes the rand will strengthen below R17/US$, while one manager sees significant weakness in excess of R20/US$.

3. Which investing style is likely to outperform in 2024?

Eight managers believe that the Value style will make a comeback in 2024, followed by Quality (six positive responses).
After Growth’s phenomenal run in 2024, this is not a big surprise.
Analysing the data, it appears that managers’ votes largely reflected the style with which we would associate them.

Most of the managers in the survey believe that the world is in for a soft landing this year, meaning that growth will slow but the economy will remain resilient.
There is an even split between managers who believe in the likelihood of an official recession (as determined by the National Bureau of Economic Research (NBER), which can officially date the business cycle if it sees significant economic weakness), versus those who believe a recession will be avoided and the world economy will continue to expand.

6. If you expect rate cuts, what do you expect the Fed Funds Rate to be by year end (bottom of range)?

The Fed Funds rate at the time of the survey was 5.25% (bottom of the range), with market expectations for year end to be 3.75% (according to the CME FedWatch Tool), and the median of the Fed Dot Plot at 4.5% for 2024.
Most of the managers surveyed believe there will be 2 cuts (25 basis points assumed) this year, while the Fed has pencilled in 3 and market is pricing in 6. Both managers who chose 3.75% are fixed income specialists, while the managers who opted for 4.75% are primarily equity centric houses.
We believe this dispersion may continue to drive volatility around interest rate decision dates this year.

7. Do you think US inflation is structurally higher going forward?

One of the key underlying reasons for differing asset manager views on the path of interest rates may be their view on a potential recession, as well as the path of inflation.
While the bulk of managers believe inflation will be re-based higher, some still believe it will return to around the 2% level, as before.

8. What do you expect from loadshedding in 2024 compared to 2023?

While SA continues to experience ongoing load shedding, most managers believe it will have less of an impact than in 2023.
Four managers believe SA will experience the same level of load shedding, while none expect more than in 2023.

9. How far do you think the Protea Men will proceed in the T20 World Cup?

The ninth edition of the Men’s T20 World Cup will be held in June 2024 and will be co-hosted by the West Indies and the US.
Apart from the established stadiums in the West Indies, games will also be hosted in New York, Texas, and Florida. England will defend the title they won in Australia in 2022, while the Protea Men aim to win the title for the first time (their best results were to reach the semi-finals in 2009 and 2014).
Most managers surveyed believe our boys will only make it as far as the semi-finals again this year. Let’s hope we can bring it home this year.
Interestingly, the only manager who believes the Proteas will win is also optimistic on all South African risk assets this year.