EDITORIAL: Take stock of hazy days ahead
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Well, hindsight is a perfect science. That will be the plausible explanation of any investor who has been caught out by the surge in stock markets in the second quarter of 2020.
Faced with unprecedented declines in the wake of the Covid-19 outbreak and the resulting lockdowns, taking the safety first option and seeking refuge in money markets did not seem unreasonable.
But everyone who cashed in an equity fund tracking the JSE all share and moved into money markets will be kicking themselves, and have a longer period to run for recouping losses from the first quarter.
After tanking 39% in the first three months of the year, the JSE jumped 25% in the three months to June, translating into total returns, including reinvested income, of 23%, as global economies received unprecedented stimulus.
In contrast a move to money markets, based on the Alexander Forbes short-term fixed interest index, will have led to a paltry return of 1.5%. The warning about not buying at the top and selling at the bottom has never seemed more appropriate.
But then, the headline numbers do not always tell the full story. For one thing, if you take it back to end-2019, you would have still done better tracking the Stefi index, which is up 3.9% for 2020, compared with 2.4% for stocks.
A cursory look at individual stocks will also show that there has been blood on the floor of the JSE. Stripping out the miners, Naspers and Prosus, the picture is grim. Banks and listed property indexes are down more than 40%, and general retailers have not fared much better, losing about 38%.
Another saying loved by financial advisers that has an element of truth is that past performance is not necessarily a good guide for what will happen in the future. And judging by recent events globally, it is not just SA retail investors who often fail to heed that warning.
The jump in the S&P 500 to a new record has analysts and fund managers scrambling to upgrade their forecasts, according to Bloomberg, which warned that this is now becoming one of the major risks to the market. Goldman Sachs was reported earlier this week as having upped its 2020 target by a fifth, citing the impact of near record-low interest rates.
But is all this optimism justified? Simon Brazier, co-head of Quality at Ninety One rightly sounded a ...
Faced with unprecedented declines in the wake of the Covid-19 outbreak and the resulting lockdowns, taking the safety first option and seeking refuge in money markets did not seem unreasonable.
But everyone who cashed in an equity fund tracking the JSE all share and moved into money markets will be kicking themselves, and have a longer period to run for recouping losses from the first quarter.
After tanking 39% in the first three months of the year, the JSE jumped 25% in the three months to June, translating into total returns, including reinvested income, of 23%, as global economies received unprecedented stimulus.
In contrast a move to money markets, based on the Alexander Forbes short-term fixed interest index, will have led to a paltry return of 1.5%. The warning about not buying at the top and selling at the bottom has never seemed more appropriate.
But then, the headline numbers do not always tell the full story. For one thing, if you take it back to end-2019, you would have still done better tracking the Stefi index, which is up 3.9% for 2020, compared with 2.4% for stocks.
A cursory look at individual stocks will also show that there has been blood on the floor of the JSE. Stripping out the miners, Naspers and Prosus, the picture is grim. Banks and listed property indexes are down more than 40%, and general retailers have not fared much better, losing about 38%.
Another saying loved by financial advisers that has an element of truth is that past performance is not necessarily a good guide for what will happen in the future. And judging by recent events globally, it is not just SA retail investors who often fail to heed that warning.
The jump in the S&P 500 to a new record has analysts and fund managers scrambling to upgrade their forecasts, according to Bloomberg, which warned that this is now becoming one of the major risks to the market. Goldman Sachs was reported earlier this week as having upped its 2020 target by a fifth, citing the impact of near record-low interest rates.
But is all this optimism justified? Simon Brazier, co-head of Quality at Ninety One rightly sounded a ...
