Financial Markets Performance Communique – 31 MARCH 2021

Financial Markets Performance Communique – 31 MARCH 2021

Listed assets around the world sold off aggressively in March 2020, as it became clear that the Coronavirus had been exported around the world, dashing hopes of quick containment as was the case in previous coronavirus outbreaks (SARS in 2003 and MERS in 2012). The Market recovery (Post Crash) has been the speediest recovery in the past 100 years of investment history. With Global and Local markets reaching all time highs over the various periods in the recovery. The Global Economy is set to grow significantly in the 2021 Year and 2022 Year. This is illustrated below with information provided by the IMF – see below.

There are still Risks in the Global economy, notably, Government debt being accumulated prior to (and during) the Coronavirus crisis to assist Economies to recover. Government debt must be paid back at some point in time and hence Taxpayers will bear the cost of the ever-rising debt locally and abroad. In South Africa specifically, the Tax base is reducing, largely due to profitability being protracted (prior to the Coronavirus Pandemic) and now certainly negatively affected due to significant losses which will occur at a local economy level. Which leads to the conversation where upweighting your offshore asset class exposure is now imperative.

Our views over the last 6 years regarding offshore weightings have been justified with Global equities (in Q1 2021) again reaching new highs on the first COVID-19 vaccine approvals by US, UK and EU regulators and the US providing $2000 billion pandemic relief. The start of the EU vaccination drive also heralded a possible return to normal in 2021. Commodity exporting emerging markets outperformed again as the vaccine news supported risk-on sentiment providing a boost to industrial commodity prices. 

The situation (as reflected in portfolios) are as follows for the period:

Over the previous 32 years in the Investment / Financial Planning Business, We continue to research and include (in client portfolios) only the Fund Managers and Funds, with Consistent, Top Decile Performance track records, over most periods (up to 15 years in duration and more) – which comprise of only approximately 70 Funds in total, Out of +/- 1900 funds available in the Retail Market. 

Having managed portfolios through several past episodes of extreme dysfunctional markets, our position remains, that a Well- Diversified Multi-Asset class investment portfolio, with commensurate Risk/Return correlation advantage, remains your only ‘free lunch’ for committed long term investors – rather than making short term Tactical calls on positions OR ‘attempting to Time the Market!’

In times of low returns, it is tempting to shift toward Cash and Cash like investments, however, this is the time (notably when interest rates are at all time lows) where portfolios need to have exposure to Equities and Global Equities. As noted above, the best place to be is within a Multi Asset class Portfolio adjusted (or in accordance) with your Personal Risk Profile whether this is Cautious through to Aggressive.

Trusting you will find the above commentary enlightening – as to the current situation in the markets