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The 2025 Nedgroup Investments Summit emphasises diversification and long-term thinking as the global economy faces unprecedented uncertainty

30 January 2025 Nedgroup Investments

Nedgroup Investments kicked off its annual investment summit week in Cape Town on Monday and hosted a session in Johannesburg, Pretoria and Durban this week.

The global economy faces unprecedented uncertainty, and the 2025 Nedgroup Investments Summit brought together Nedbank Group’s Chief Economist, Nicky Weimar, and five of their Best of Breed™ portfolio managers to share knowledge, experiences, and predictions for the year that lies ahead. Presentations at the Investment Summit painted a detailed picture of the challenges in a highly dynamic global market, while emphasising the importance of resilience, diversification and long-term thinking.

Nicky Weimar, Chief Economist at Nedbank Group, provided a macroeconomic overview, with an in-depth analysis on global and South African markets, including the economic challenges posed by high interest rates and global debt levels. "We are seeing an unprecedented level of global debt, and the big question is how sustainable this is," Weimar stated, "central banks are walking a tightrope, trying to control inflation without stifling growth."
Weimar also spoke about the uneven impact of high interest rates on different segments of the economy. "In the US, while many homeowners locked in low mortgage rates during the pandemic, those entering the market now are facing significantly higher borrowing costs. This divide is slowing housing transactions and impacting broader economic activity," she noted.

Locally, Weimar explained that South Africa continues to face structural reform challenges and the improvement of these is integral to economic growth, and to ensure that the country is competitive on an international scale. While there has been significant improvement in Eskom’s performance, there is still slow momentum in the logistics, rail and minerals sectors.

Echoing Weimar’s analysis, Lara Dalmeyer, Portfolio Manager of the Nedgroup Investments Flexible Income Fund, discussed global fixed income markets and the drivers of inflation, as well as the cautious approach of the Fed regarding further interest rate cuts and the challenges posed by high inflation. “We are in unknown territory when it comes to fighting inflation, and the effectiveness of monetary policy remains uncertain," she said.

Dalmeyer stressed the importance of resilience and diversification to mitigate risk during periods of ongoing uncertainty. "Diversification is not just about spreading investments across asset classes, it’s about understanding how they interact under different conditions. This is how we create portfolios that can withstand market shocks," Dalmeyer explained.

She also explained the key role of adaptability in the current global economic environment and why investors need to be prepared for a delicate balancing act between inflation, growth, and central bank policy.

Nick Balkin, Portfolio Manager of the Nedgroup Investments Stable Fund, spotlighted investment trends in 2025, while addressing significant macroeconomic questions, including US exceptionalism, rising interest rates, and government debt sustainability. "The US has over 100% debt-to-GDP, which is a phenomenal number and more reflective of an emerging market rather than a developed one," he stated, "the U.S. economy's resilience, despite substantial interest rate hikes, raises questions about the lagging impact on the broader economy.”

Balkin’s presentation also touched on the transformative potential of artificial intelligence (AI). "AI is an important topic. While experts cannot yet predict its full impact, it is clear that AI will drive significant productivity gains, particularly by automating simple, replicable tasks. However, its long-term effect on inflation and employment remains a key question that we must remain mindful of," he said.

Balkin’s reflection on historical market trends drew parallels to the current environment and cautioned against becoming overconfident. "The S&P’s recent performance is remarkable, but history has shown that such momentum often leads to negative outcomes in subsequent years. It’s a reminder that we must remain cautious and avoid overconfidence," he emphasised.

Murray Winckler, Portfolio Manager of the Nedgroup Investments SA Equity Fund, presented on South Africa’s unique mix of challenges and opportunities, and the steps required to make the country a compelling investment and why he believes fixed investment is the answer. "The most important thing to focus on in South Africa is fixed investment spending. Without it, we will not see structural improvements in the economy. Fixed investment spend currently sits at 15% of our GDP, which is roughly R1 trillion. Historically, this number reached 22% in 2008, and long-term growth requires us to approach 25-30%,” Winckler noted.

According to Winckler, if South Africa can grow fixed investment by 5-10% annually over the next five years, this may push GDP growth to around 2-3% annually. However, achieving sustained growth of 5% will require significant public-private partnerships and a reliable policy environment.

Speaking about the challenges and opportunities for South Africa, Winckler highlighted cyclical recovery, business confidence and infrastructure development as opportunities for growth. "We are seeing a cyclical recovery underway, with inflation under control and interest rate cuts likely to support growth. Despite pressures on consumers, lower inflation and stable transport costs are creating some breathing room,” Winckler continued, "for growth to accelerate, business confidence must improve. The private sector, which accounts for two-thirds of fixed investment, needs a stable and predictable policy environment to unlock further investment, and key investments in water, electricity, ports, and rail are critical. The government must facilitate these projects while encouraging private sector participation, which could amount to over R100 billion in contributions,” he concluded.

On the global stage, Winckler acknowledged risks and opportunities, particularly from the US and China. "Valuations in the US are high, and while growth remains strong, long-term returns may be lower. China's response to global challenges, including potential macroeconomic stimulus, will also be crucial for South Africa, given our reliance on resource exports," Winckler added.

Delegates in attendance also heard from Omri Thomas, Portfolio Manager of the Nedgroup Investments Opportunity Fund, who explored the relationship between renewed political and economic confidence and tangible economic development, while analysing key sectors and employment trends, and Saul Miller, Portfolio Manager of the Nedgroup Investments Balanced Fund, who discussed strategies to navigate economic uncertainties by leveraging diversified portfolios.

The Nedgroup Investments Summit presented an opportunity for investors, industry leaders, and stakeholders to gain insights into the critical themes driving financial markets in 2025. The annual investment summit is in line with Nedgroup Investments’ commitment to empower informed investment decisions through thought leadership and robust investment and economic market analysis.

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