Hiking the narrow ridge: Eight market themes for investors 

From Washington to Beijing, from the JSE to the Nasdaq, investors are hiking a narrow ridge – and the ground beneath them is shifting, with changing US policy, dollar uncertainty and sharp market swings. Understanding these key investment themes will help you navigate these uncertain times.

What’s the market trail telling us? We’re walking a knife’s edge …

The global economy is delicately balanced, with interest rates, geopolitics, US policy and trade wars all in the mix. Many investors look at global equities and see only risk: slow earnings growth, stretched valuations and mounting uncertainty. But it’s important to see the bigger picture – opportunities remain for those who can navigate volatility with clarity.  

Market breadth has increased, but the ‘Magnificent Seven’ have staged a comeback 

After a broadening rally earlier in the year, the April sell-off cleared the decks. Since then, the “Magnificent Seven” – Alphabet, Amazon, Apple, Broadcom, Meta, Microsoft, Nvidia – have reasserted some leadership. It’s a reminder that while diversification matters, markets are still swinging between extremes, again reinforcing the knife’s-edge environment we’re navigating.

Global equity exposure must be selective

Story stocks have shown cracks. Real earnings, real cash flow, real resilience – that’s the anchor. The companies we hold in our global equity portfolios have continued to deliver double-digit US dollar earnings and free cash flow growth, even as index-level returns wobble. Investors should seek exposure to businesses that have growth, not the ones that have the perception of growth and high valuation risk – because that’s where real vulnerability lies. 

The US is transforming – or teetering …

We see two possible scenarios: a successful shift to a more balanced, less debt-fuelled economy versus the risk of slowing growth and deflationary pressure. Either way, the next phase for markets will be noisy. There is widespread chatter that this is the beginning of a major bear market for US assets, the US economy and the dollar. But, for the dollar to depreciate over time, investors have to believe that opportunities in other jurisdictions are much more compelling. Europe still faces the burden of higher defence spending, while many emerging markets are wrestling with their own idiosyncratic challenges. Just because the US has lost some of its shine doesn’t mean other countries or regions have better prospects.  

… but don’t write off US-listed stocks

Many of our largest global equity holdings, such as Booking Holdings and Philip Morris International, may be US-listed but they earn the bulk of their revenues offshore. If the dollar weakens, their earnings get a lift, not a haircut. We believe there are significant opportunities for these companies to continue to do well, even if investors have an adverse view around the macro picture. Ultimately, it is the fundamental drivers of businesses – not top-down regional allocations – that matter most. 

South Africa? Low growth, limited depth

The domestic story still lacks a catalyst. A few South African names like Capitec, Shoprite and Santam offer quality, but limited scale. Rates may fall – which would be positive for equities – but markets have largely priced in a downward move. We are invested in select quality businesses, but concentration risk prevents larger allocations.

Portfolio positioning: quality at the core

With rate cuts on the horizon, both local and global cash will become less rewarding. Bonds and gold still play a role – but global equities that demonstrate true earnings resilience stand at the heart of the Ninety One Opportunity Fund’s equity allocation. The latest portfolio composition also features a 29% allocation to select South African-listed equities, many of which generate the bulk of their revenues offshore. We balance the equity weighting through diversified income exposure (bonds and cash), with gold providing some defence. 

So, what’s the bottom line?

This isn’t the time for passive exposure or macro bets. It’s a time for quality – for deliberate selection and high-conviction positioning. For investors traversing the narrow ridge, this means focusing on resilient companies that can deliver real growth over the longer term.

Clyde Rossouw is head of quality at Ninety One.

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