What next?
Entering into week 3 of 5, it is
becoming more evident with every day that the social and economic impact of the
Covid-19 virus will be felt far longer by South Africans than the virus itself.
In the attached newsletter, Chief Investment Officer of Coronation, Karl
Leinberger, provides investors with an interesting insight into how the
pandemic is likely to play out as well as offering up Coronation’s thoughts
regarding the virus and their fund positioning going forward.
Market Update
On the 23rd March the
JSE All Share Index (JSE ALSI) was down 33.64% since the start of the year.
Over the last few weeks the stock market has recovered +/- 50% of the losses
and the JSE ALSI is now -16.92% for the year. So there has been a steady but
gradual improvement. Of course we have no idea of what is going to happen but
it would seem that the markets will remain volatile.
At the moment we are all living
the experience of the Coronavirus and being constantly bombarded by bad news!
It is understandable, that at times like these, investors are feeling negative
and despondent. We are currently living through an unprecedented time and it is
impossible to know how the future will play out. One of the most important
investment decisions is to remain rational rather than being guided by fear and
the constant refrain of bad news!
We are encouraging investors to remain invested.
- We have always advocated that buying high and selling low is an irrational strategy.
- Do not rush into making sudden rash judgements!
- Investors who sell at the sell levels are crystalizing losses.
- “Only when you combine sound intellect with emotional discipline do you get rational behaviour” (Warren Buffet)
- The fund managers within your portfolios are making rational investment decisions
- The funds within our client portfolios are managed by excellent fund managers who constantly seek out outstanding investment opportunities and at the same time strive to limit the risk within investments.
- The fund managers are attempting to create long term wealth and buying shares at levels that are some 30% cheaper than at the beginning of the year. This bode well for medium to long term success!
There is a significant quote from
the article by Karl Leinberger, the Chief Investment Officer of Coronation Fund
Managers:
“A long time horizon has been
the cornerstone of Coronation’s success of many decades. Every crisis we have
lived through (and the list is getting long!) has presented an outstanding opportunity
for those investors prepared to take the long view. We currently find
ourselves swimming in stunningly cheap assets! We have been astounded by
some of the long-term opportunities that have been on offer in the last few
weeks. The list of stocks, in both domestic and global markets, that our
analysts believe offer more than 100% upside (to their underlying intrinsic
value) is a long one.”
Investors who stay invested will
undoubtedly reap the long term benefits presented by the current opportunities.
It is at times like these that it is important to remember that although a decline may have been experienced, this is temporary. Although no one can accurately predict how the next few months will play out investors should not forget that their Fund Managers remain committed to delivering on their specified investment mandates. Whilst there may another decline in the value of the JSE All Share index, there will most certainly also be a recovery. The important point is for investors to remain invested to enjoy the benefits arising from the opportunities presented today.
Interest rate
cut by 1%, current yields
This morning the
South African Reserve Bank announced a further 1% decrease in interest rates.
We have been in constant communication with some of the Fund Managers who
manage our income portfolios for clients. Their guidance is that the funds will
continue to provide investors with a yield in excess of 8%. This is a real
return of 3% after inflation. The downgrading of South Africa to junk status forced
foreign investors to sell their positions in South Africa, this has provided
opportunities for Fund Managers to lock in returns for the next 18 – 24 months
at very attractive rates.
We would like to remind everyone
that we continue to work remotely from home and are available to help assist in
any way we can. Stay safe and God bless!
