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You're listening to Strictly Business
Podcast with Lindsay Williams.

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The war against Iran by the United States
and Israel has caused problems for markets

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globally,

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but particularly for emerging markets.

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And South Africa has not been spared with
me as Malcolm Charles, Portfolio Manager

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at 91 in Cape Town.

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Last time we spoke, Malcolm, everything
was going so well.

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And as always in markets, we knew that
something must happen, but we didn't

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realise the extent

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of this particular happening.

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It really has been quite brutal, hasn't
it?

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To be honest, Lindsay, it's been horrible.

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It has shaken the entire market, global
market, as you said, and the

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ramifications, unfortunately,

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are dire for many, many economies.

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And I think the scarring for growth
across, no one's going to be untouched by

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this.

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And that's the sad thing is, you know, so
many countries were coming right.

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but projection was positive, inflation was
muted, growth was going to be okay,

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interest rates were going to be cut in
many jurisdictions.

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And every single one of those assumptions
is now off the table.

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Yes, I think the question now is, is this
just a blip?

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Or is this a change in trend?

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And I suppose when you look at it from an
essay specific point of view, a couple of

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years ago,

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it might have been the second one, a
change in trend.

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But now we've gone into this crisis, and
it is a crisis, slightly better off than

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we might have been.

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No, absolutely.

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I think the silver lining is we went in
pretty decent.

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We just had a fantastic budget where it
was conservative.

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We had a ratings upgrade last year.

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The RAND had rallied dramatically
throughout last year.

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Interest rates had been cut.

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Inflation was at 3%.

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So you can go on and on about how things
were actually coming right.

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We were started to see decent growth,

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employment was even shown tentative signs
of improving.

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So we were in a very, very good space to
go into it.

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As you said, if it had been a couple of
years ago when we couldn't even keep the

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lights on,

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then we might as well actually have turned
everything off and almost given up.

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So the country was in a much stronger
position, and it's always good to be in a

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strong position when the crisis hits,

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because then you can actually...

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Try and mitigate some of it, like we saw
with the petrol price increase.

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You know, the minister announcing a three
rand reduction in the levy.

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Now, we would not have been able to do
that even a year ago.

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Yes, it's cold comfort, though, when you
see the markets that I'm seeing on my

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screen now with the South African 10-year
bond yield at

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9.04%.

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Bear in mind, it's come down from exactly
a year ago, Malcolm, exactly a year ago.

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Liberation Day was...

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Actually, you know, it's 364 days ago.

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Liberation Day put the South African bond
yield at something like 11.15%

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for the 10 years.

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Now 9.04%.

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But it has been to, I think, below 8%,
hasn't it?

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Yeah, no, no.

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So it depends on where your reference, if
your reference point was a year ago, then

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we still, we fantastic.

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If your reference point was a month and a
bit ago, then you're a little bit sad

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because, you know, the All Bond Index.

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on last month, gave up almost 7%, but it
had given you

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29% from a year ago.

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So it really is the reference point.

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But to me, the sad thing is it was
unnecessary.

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It's not something that's made the world a
better place.

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And I think a lot of financial pain has
been taken across companies, across

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people,

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across funds.

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And that's the new reality.

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It's a crazy reality right now.

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And it's a very volatile reality.

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Yes, it is.

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It was so unnecessary.

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And we could go on for a long time.

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But it's not our job to do that about what
has happened in the last four weeks.

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But the reality is what we're going to do
from now on.

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And what are you going to do over the last
month?

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Have you been active in your portfolio
construction?

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Absolutely.

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We've had to be very, very active because
It wasn't something that was like, you

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know, a change of economic cycle.

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This was a shock to the system.

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So,

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you know, you couldn't really preempt it.

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So we've had to very quickly reduce risk.

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We've had to increase our optionality and
our protection in portfolios and just try

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and preserve

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capital as much as we can.

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We're in a very different inflation and
interest rate environment than we were a

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month ago.

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We would, you know, as a...

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as I mentioned earlier, we've gone from
expecting two rate cuts in 2026 to, you

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know,

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if we get two to three hikes this year.

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I don't think anyone will be completely
surprised.

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So, you know, we've had a changed
portfolio risk.

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We've had a look to try and increase yield
with very little risk associated with that

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yield.

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Whereas a couple of months ago, you were
happy to take a lot more risk in the

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portfolio.

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So absolutely a very active time.

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But, you know, things change and you have
to change with it and you have to adapt

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your view, adapt your portfolio.

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most importantly, bring down the risk in
the portfolio.

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Yesterday, which was the last day of the
first quarter of 2026, markets rallied

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strongly.

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Wallet price came down.

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Asset classes like equities went through
the roof.

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I think the Nasdaq was up nearly 4%, for
example.

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Bond markets rallied.

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In other words, yields coming down.

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And a lot of people might say that that
was window dressing at the end of the

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first quarter.

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Other people will say, well, it's just
another Trumpism, another careless comment

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from the President of the United States,

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and the markets reacted to that, and they
should know better.

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But what do you think?

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Do you think that the worst is over,
Malcolm?

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Yeah, it's an interesting question,
because I think a little bit of both

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happened.

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I think, you know, there is a behavioral
end of the first quarter sort of in some

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markets.

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And I think Trump is desperate for an off
ramp.

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The problem is, it's a bit harder than you
tariffs.

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Tariffs were one-sided.

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He decided to put them on so he could
decide to delay them or take them off.

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When you're at war with someone, the other
party needs to agree.

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And unfortunately, the longer it's gone
on, if this was two weeks ago, I would

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have said,

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absolutely, it's an off ramp and he can
claim his victory.

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And I think we would have been okay.

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The fact that it's gone on for a month and
he's got ground troops in the area.

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I think you've got to be a little bit
naive if you think that we can wrap up and

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say all the risk is off the

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table right now.

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I think caution remains and it's a little
bit early to bet the farm on any markets

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right now.

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Okay, so you're saying to yourself the
round has gone from 15.50 to 17 plus.

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The bond rates have done what we discussed
earlier on.

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The South African Reserve Bank and the
authorities in South Africa have been

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swift to move in a way that they couldn't
have moved a

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couple of years ago.

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But are you waiting with your tender drive
for something concrete to materialize in

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the next couple of weeks, hopefully?

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Yeah, I think that's the prudent outlook.

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You're tempted to go the human nature way
and say, I'm going to back it against

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this.

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But we custodians of capital, we've got to
do what's right.

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I don't mind missing the first little bit
of a recovery as opposed to getting in too

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early and wiping out capital.

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So I think it's prudent to be a little bit
more cautious.

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I think you can be a little bit more
active in these markets when you have big

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swings.

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But to bet the farm on

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Trump miraculously finishing a war after a
month, I think is probably a little bit

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irresponsible.

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Malcolm, thanks so much for your time and
very good luck.

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And I look forward to our next chat, which
might be sooner than you think.

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Malcolm Charles is a portfolio manager at
91 in Cape Town.

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The views and opinions expressed in these
podcasts are those of Lindsay Williams and

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various contributors and do not reflect
the policy,

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position or opinion of any other agency,
organisation,

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employer or company associated with
StrictlyBusinessPodcast.com.

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Assumptions made on the analyses are not
reflective of the position of any other

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entity other than the speaker or the
author.

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And since we are critically thinking human
beings, these views are always subject to

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change,

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revision and rethinking at any time.

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Please do not hold us to them in
perpetuity.
