Old Mutual H2 investment strategy

South African assets have faced a challenging first half of the year, plagued by the country's worst power shortages in history. As global markets outperformed local markets, investors are now looking ahead to the prospects for the second half of the year. Izaak Odendal, Investment Strategist at Old Mutual Wealth, sheds light on the global investment landscape and provides insights into potential strategies for the remainder of the year. With over 30 years of experience in the industry, Odendal offers valuable perspectives on key trends and considerations for investors moving forward. The first half of the year has seen strong performance from global equities, particularly in the US, driven by robust economic indicators and a resilient consumer base. However, the looming impact of sharp interest rate hikes in the US raises concerns about the future trajectory of the economy. Odendal points out that while the current outlook appears favorable, the repercussions of these rate increases are yet to be fully realized, underscoring the importance of a cautious approach. Another notable development has been the unexpected weakness in China, contrasting with earlier optimism about a consumer boom in the country. Chinese equities have struggled, presenting a stark contrast to the performance of US markets. Amidst these dynamics, Odendal highlights the significance of identifying potential 'surprise performers' in the second half of the year. Discussing the role of artificial intelligence (AI) in driving market trends, Odendal emphasizes the need for a measured approach. While AI holds promise for transforming various sectors, uncertainties surrounding its impact and beneficiaries necessitate a long-term perspective. Drawing parallels to the internet's evolution, Odendal cautions against making hasty projections and advises investors to consider the extended timeline for AI's integration into daily life and business operations. Acknowledging the transformative potential of AI, he stresses the importance of patience and strategic planning when navigating this emerging trend. Shifting focus to the South African market, Odendal assesses the current landscape and cautiously points to signs of stabilization. With improvements in power supply and indications of economic resilience, there are glimmers of hope for a more stable outlook in the coming months. While challenges persist, such as ongoing load shedding concerns, recent data reflects a degree of resilience in the local economy. Odendal notes that despite prevailing weaknesses, households have managed to adapt to current conditions, with manageable debt burdens and easing inflation providing some relief. Looking ahead, he suggests a nuanced approach to asset allocation, advising against excessive pessimism towards South African assets. Highlighting the relatively low valuation of these assets, he encourages maintaining exposure to the local market while navigating complexities in the global arena. As investors weigh the balance between equities, bonds, and other asset classes, Odendal emphasizes the importance of diversification and strategic positioning. With uncertainties shaping the investment landscape, aligning investment strategies with emerging trends and market dynamics becomes paramount. By carefully assessing opportunities and risks, investors can navigate the complexities of the global economy with clarity and foresight, guided by informed decision-making and a long-term perspective.