2018 was an annus horribilis for global stock markets! Not one stock market in the world produced positive investment returns last year. The investment guru, Warren Buffet, made the following observation: “The stock market is a device for transferring money from the impatient to the patient.” It is in trying times such as these that investors need to make rational investment decisions and be patient.
In our newsletter in August 2015 we wrote about declining stock markets. Some of the comments are worth repeating:
“Declines in the stock market are quite normal and should not be regarded with fear! We, at Kevin Mills Financial Services, have always made it abundantly clear that markets go up as well as down! From time to time all markets decline! This is quite normal and part of the dynamic of any stock market. The important thing to realise that this is not some cataclysmic event! It is quite, quite normal.
In many ways a decline in the market is good news. Markets need to take a “breather.” In fact when a market declines, it presents great opportunities for fund managers to select shares that are now trading cheaper than a few months ago.”
Declining markets are obviously of great concern to investors. We at Kevin Mills Financial Services are very cognisant of the anxieties and real lived experiences of our clients. Investment losses are always concerning! We continuously strive to obtain a deeper understanding of the markets and to gain insights into the thinking and investment strategies of the fund managers through which we invest. In attempting to do this over the past month, we have attended presentations by fund managers of the following companies: Allan Gray, Coronation Asset Managers, Investec Asset Managers, Marriott Income Specialists, Nedgroup Investments, PPS Investments and Prudential Investment Managers.
Our interactions within these fund managers produced some consensus opinions:
- Declining markets present attractive and exciting investment opportunities.
- Investments should be made on a long term basis and not on short term market movements.
- Over the past ten years not one fund in the South African General Equity sector made a loss. The average performance of this sector was 10.14% per annum.
- Over the past ten years not one fund in the South African Multi-Asset High risk sector (Balanced funds) made a loss. The average performance of this sector was 8.84% per annum.
- The best investment options remain offshore.
- The fair value of the Rand is US$1 = R13.50.
- Most of the fund managers are optimistic and are finding good value in shares at the current prices.
- With the South African elections around the corner there is going to be a lot of political “noise.” Politicians are likely to say the least sensible and intelligent things.
This year has started off on a much more positive note for stock markets. January 2019 has been one of the best months in decades. Despite on-going volatility, the following returns were recorded for January:
- JSE All Share Index: 2.7%
- Down Jones Index (US): 7.2%
- FTSE (UK): 4.1%
- Dax (Germany): 6.7%
- CAC 40 (France): 5.5%
- Hang Seng (Hong Kong): 9.6%
- Nikkei (Japan): 3.8%
It is likely that volatility will continue but it is not all doom and gloom!
Save the Date
To try and make sense of the current investment climate we will be hosting an investment presentation on Wednesday 6th March 2019 at 11h30 to 13h30. Our guest speaker is Andrew Lapping, the Chief Investment Officer and Director of Allan Gray Group Proprietary Ltd,who will provide a market update and review the key challenges facing South African investors.