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Investor report and newsletter for the third quarter of 2023


Investors went into the third quarter increasingly confident that a recession was unlikely this year, thanks in large part to a continued healthy job market and consumer spending. However, heading into the final months of 2023, the bullish sentiment that lifted stocks out of a bear market has faded. “Higher for Longer” has become the newest catchphrase and sentiment is concerned that the aggressive rate cuts expected in 2024 are now looking unlikely, even though signs continue to point to inflation pressures easing in the coming months.


The “Higher for Longer” narrative muted growth expectations, leading to a lacklustre third quarter for equity markets and in particular technology stocks which have driven a vast majority of the market’s performance year to date. Rising oil prices, up 28.5%, provided some reprieve for the overall market as energy stocks had a strong third quarter. After three consecutive quarters of positive returns, global equities declined by 3.8%, taking the year-to-date return to 8.5%.


Historically low interest rates have kept the focus on global equites as the asset class of choice for most of the past decade. The extent and speed with which rates have increased over the past year, in the US for example from below 1% to over 5%, has placed global bond markets back on the table. The chart below illustrates total return of select fixed interest investments should interest rates rise or fall by 1%. While higher for longer does imply rate cut delays into 2024, the potential returns once rates start to decline are compelling. Taking higher equity valuations into account, the case for bonds in a balanced strategy is worth consideration.

Source:JPMorgan Asset Management Guide to the markets, September 2023

The fundamentals for South Africa remain poor. Failing systems, such as power and rail and acute corruption, increase the cost of doing business, keeping inflation above target. The weaker fiscal position with high government debt increases economic fragility. Inflation should moderate and interest rates decline sometime in 2024. The uncertain growth outlook, including China, will impact on commodity demand and the currency. Equity valuations are attractive, but with risk. High yielding domestic bonds are a consideration.

Considerable uncertainties remain, both economic and geopolitical, which will impact sentiment and market volatility can continue to be expected.



The table below highlights the performance of selected markets and asset classes to 30 September 2023

Source: MSCI, Datastream, Bloomberg, Visio and Factset


An investment objective to provide inflation beating returns over time remains more crucial than ever. Diversification across asset classes will be key. It is essential to focus on your unique investment horizon and financial requirements to optimise your portfolio accordingly.


Thank you for your interest and ongoing support.

We welcome any feedback or questions.


Kind regards

The BAYMONT team



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