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April 2020 – Where to next and Interest rate cut

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!

March 2020 – South Africa downgraded to junk

Moody’s downgrades South Africa to Junk Status

It’s fair to say that the 27th March 2020 might be regarded as one of South Africa’s more unknown days. The day started with all South African’s being ordered to stay at home and only leave their houses should they be involved with essential services, or to stock up on food and supplies. Late in the evening, confirmation was received from Moody’s that South Africa had lost its investment-grade rating and was now junk status.

In the attached article Marriott ‘The Income Specialists’ provide a brief summary as to the effects that the downgrade will have and the opportunity that has arisen from this downgrade. Although the current volatility and uncertainty in the market causes all investors to become anxious, the opportunities to ‘enter the market’ at a reasonable price will lead to potential long-term real returns for investors who can ignore all the ‘noise’ and focus on the fundamentals of the investment.

The Fund Managers managing our clients’ funds, remain focused on these long-term goals and will continue to remain level-headed in these uncertain times and purchase stocks at attractive valuations which will lead to capital appreciation for those investors who continue to remain invested and focus on their long-term financial plans.

A reminder that although our offices are closed we continue to work from home and are available to meet with clients over various media platforms such as Skype, Zoom or the telephone.

Stay safe and God bless!

“The only certainty, is that nothing is certain.” Pliny the Elder

March 2020 – Business as usual

Business as usual!

Never has the world experienced a global health crisis of this magnitude as the risks of Coronavirus (COVID 19) intensify across the United States, Europe and within our own country, South Africa. This is unprecedented in history and no one knows how this is all going to end up!

On Monday evening President Cyril Ramaphosa announced his decision to implement a nation-wide twenty-one-day lockdown from midnight on 26 March 2020 until midnight on 16 April 2020. South Africans will have to stay at home in an attempt to curb the spread of the Coronavirus.

Although our offices will close on 26th March 2020, we will all be working from our homes. It will be business as usual except we will not be able to have any face to face interactions. We can be contacted on the following contact numbers:

Please give us call us if we can assist you with anything.  We will do our best to provide the best service that we can. 

These are worrying times! We have never experienced a crisis of this magnitude and the disruption to our day to day lives, to society and the economy. We are being asked to make sacrifices in order to combat this virus and with it comes the anxiety of the isolation from family and friends. This disease can be defeated! We urge all South Africans to stay at home, keep safe and assist in combating this virus.

We pray that you will all stay healthy!

Kevin, Greg and Leonie

Healing God, bring healing to those who are sick with the Coronavirus and be with their families and neighbours. We pray especially for those who are isolated, that they may know your love. Stay by our side in this time of uncertainty and sorrow.