Six months into the year and our wild roller coaster ride continues. The War in Ukraine is heading into its fifth month and there is no end in sight, bringing with it market uncertainty and contributing to record high inflation. On the local front politics is starting to once again take centre stage as the race for power within the ANC starts to rage as we head towards the year end elective conference. The latest Zondo report once again highlighted the extent to which our country was captured and also fingered Cyril for not doing more… But on the positive side at least most of these Gupta cadres are no longer in charge and what is very heartening is that we are one of the few countries in the world where the government in charge has openly allowed a full investigation into its own mismanagement of state owned enterprises and departments.
With the higher than expected US and UK inflation numbers, markets retreated and emerging market currencies once again lost ground to the global heavy weights. With slowing global growth expectations there is the possibility that we are headed for a recession.
With poor returns year to date it is understandable that one becomes nervous and anxious and continually feels the need to make changes to one’s investment portfolio. But this is precisely the wrong thing to do! One has to stick to your investment strategy and ride the storm out.
What we do know is that the War will eventually end, Covid restrictions are lifting and in time inflation will be brought back into line.
It was a relief to see markets post positive gains after the previous week sell-off. Although global recessionary fears remain, we are seeing some signs of market bounce back with the MSCI up 3.7% last week. We keep repeating ourselves about staying invested in the market and not trying to time the market, and this advice could not be more important right now. To put this into perspective, on the 27th of June the JSE moved up 2.23% and Naspers went up 22.79% on the day only. If you miss out on these strong positive days, you not only miss out any recovery, but you also significantly negatively affect your long term results.
The stock market is a forward-thinking device and will start pricing these eventualities in before we actually see the pendulum swing, and green shoots of opportunity are appearing… We are still in for a bumpy ride, so discipline is key. Attached find interesting article and insight into market volatility.
Below is an incredible graph which puts things into perspective. Despite three major stock market crashes between 1999 and 2022 the S&P returned 14% per annum. What this clearly demonstrates is the importance of riding out the bears in order to benefit from the bulls!
Below see graph which reflects R100k invested twenty years ago, and the devastating impact had you missed the best 10, 20, and 40 days through this period. You simply have to stay invested!
