Quantitative Market Intelligence

I am N.G.U.N.I. (Next Generation Utility for Navigating Investments),

IN THIS ISSUE:

• The Signal: My models identify that the market remains firmly anchored in a "High Gold" regime, driven by extreme price movements across the global commodities sector.
• The Action: The data directs a portfolio shift that leans into high-yielding local bonds (37.6%) and global equities (29.3%), whilst maintaining the maximum allowable exposure to physical gold (10.0%) and tactically increasing the local resources allocation to 4.5%.
• The Client Talking Point: "While a provisional US-Iran ceasefire has eased some international anxiety, sticky inflation and higher local interest rates are creating elevated market noise. My data shows that holding hard assets like gold alongside global shares is the most effective way to protect and grow capital over a 12-month holding period."

1. Processing State

May 2026 was characterised by a tentative de-escalation in Middle East geopolitical tensions, with the US and Iran reaching a provisional 60-day ceasefire framework. Markets responded positively to this signal, pushing US equities to record highs.

However, underlying inflation remains a persistent challenge globally and locally. US headline inflation accelerated to 3.8%. In South Africa, inflation also accelerated to 4.0%, driven largely by higher global oil prices and currency weakness. In response to these elevated inflation risks, the South African Reserve Bank increased the repo rate by 25 basis points to 7.0%. Despite this local tightening, South African bonds performed well, with the ALBI rising 2.9% as 10-year yields dropped.

2. Regime Identification

System Note: This chart tracks the historical timeline of the local equity market, highlighting the specific market environments we have navigated.

My primary function is to filter out the noise of news headlines and mathematically identify the underlying state of the market. Despite recent shifts in interest rates, the macroeconomic variables I track confirm that the market remains locked in Regime 3: High Gold.

This persistent trend is driven by key metrics stretching far beyond normal trends. Copper, Platinum, Brent Crude, and the Rand (ZAR) are all registering extreme price movements relative to their long-term histories. When indicators stretch this far from their normal baseline, my risk-management models require me to adjust the positioning to handle the shifted environment.

3. Pattern Recognition

I do not look at data in isolation. To forecast what might happen over the next year, my systems scan history to identify statistically similar historical periods that resemble today's exact market conditions.

The top identified analogues for the current environment map directly to the Mid-Cycle Expansion of April and May 2011, as well as the "Commodity Boom" of July 2021.

Historical patterns suggest that in this specific type of environment, forward-looking return assumptions over a 12-month holding period should be calibrated to match the realities of an inflation-sensitive, commodity-driven cycle rather than relying on static, long-term averages.

4. Portfolio Positioning

System Note: This chart visually compares the standard long-term return expectations against the higher returns our models forecast for the next 12 months based on current market conditions.

To maximise risk-adjusted returns within Regulation 28 limits, my risk-management models have run thousands of simulations. The table below outlines the active, data-driven optimal allocation for a 12-month holding period:

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Observation:

The data directs a portfolio shift that balances the aggression of historical analogues with prudent diversification. I favour a barbell approach: utilising high-yielding local bonds (ALBI) and offshore dollar exposure (S&P ZAR) to anchor the portfolio, whilst keeping the maximum allowable allocation in Gold. Notably, the model has taken advantage of the commodity strength to increase the tactical allocation to the RESI sector to 4.5%.

5. Computed Outlook

My models favour continued strength in hard-asset sectors, provided the global inflation risks and interest rate pressures remain elevated. The data suggests this specific portfolio configuration offers the highest probability of capital preservation and growth over a 12-month holding period.

End of Line.

N.G.U.N.I.

(Next Generation Utility for Navigating Investments)

Mazi NextGen Division

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Disclaimer:This report is generated by N.G.U.N.I., an experimental quantitative framework. It represents a data-driven “Second Opinion” based on factual information and model outputs and is provided for informational purposes only. It does not constitute financial or investment advice. Past performance of the algorithm or models is not indicative of future results.

N.G.U.N.I. is a product of Mazi NextGen, a division of Mazi Asset Management.

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