EDITORIAL: Right now, it’s sensible to be bearish on cash
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The latest survey of local fund managers by Bank of America Securities certainly gives a mixed picture. Bank of America Securities is better known in SA as as Merrill Lynch, its name before the corporate dealing that emerged from the debris of the global financial crisis.
The survey revealed that the proportion of investors bearish on cash was the highest since 2003, when the global economy was rebounding from a recession. This might be seen as a positive signal that the people whose job it is to allocate savings are seeing enough of an improvement to put that money to work.
On the other hand, this could just be a reflection of monetary easing by the Reserve Bank, which pushed the repo rate to its lowest level in about half a century. The lack of returns from cash are pushing yield-seeking investors towards government bonds, not withstanding the dire fiscal position, as well as commodities and equities.
While the JSE has recovered from the worst of the 2020 sell-off to be relatively flat for the year, this has been concentrated in commodities and in Naspers and its international technology unit, Prosus.
For the unloved shares, such as banks that are down about 40% for the year, there may well be light at the end of the tunnel. There’s much debate about whether they have set aside enough provisions for bad debts as the worst of the retrenchments in the economy may still be coming.
Investors who are looking at these and wondering if they've reached the bottom might be encouraged by the finding that “no manager is concerned about banks”. And the finding that about 80% will see average equity returns of about 30% in the next 12 months, probably in “lagged domestics this time”, will encourage many a bull.
A word of caution: while 79% see more buying than selling opportunities in the equity market, this is still lower than the 88% recorded in 2003. “In 2003, 100% of managers said the equity market was undervalued; a net 21% this month.”
Before the Federal Reserve’s annual Jackson Hole, Wyoming, conference, held virtually this year, much speculation was about whether the chair, Jerome Powell, would deliver a profound change in the central bank’s approach to interest rates. What was being discussed before the event would not be revolutionary for SA: the idea of chasing an average so that policymakers can ...
The survey revealed that the proportion of investors bearish on cash was the highest since 2003, when the global economy was rebounding from a recession. This might be seen as a positive signal that the people whose job it is to allocate savings are seeing enough of an improvement to put that money to work.
On the other hand, this could just be a reflection of monetary easing by the Reserve Bank, which pushed the repo rate to its lowest level in about half a century. The lack of returns from cash are pushing yield-seeking investors towards government bonds, not withstanding the dire fiscal position, as well as commodities and equities.
While the JSE has recovered from the worst of the 2020 sell-off to be relatively flat for the year, this has been concentrated in commodities and in Naspers and its international technology unit, Prosus.
For the unloved shares, such as banks that are down about 40% for the year, there may well be light at the end of the tunnel. There’s much debate about whether they have set aside enough provisions for bad debts as the worst of the retrenchments in the economy may still be coming.
Investors who are looking at these and wondering if they've reached the bottom might be encouraged by the finding that “no manager is concerned about banks”. And the finding that about 80% will see average equity returns of about 30% in the next 12 months, probably in “lagged domestics this time”, will encourage many a bull.
A word of caution: while 79% see more buying than selling opportunities in the equity market, this is still lower than the 88% recorded in 2003. “In 2003, 100% of managers said the equity market was undervalued; a net 21% this month.”
Before the Federal Reserve’s annual Jackson Hole, Wyoming, conference, held virtually this year, much speculation was about whether the chair, Jerome Powell, would deliver a profound change in the central bank’s approach to interest rates. What was being discussed before the event would not be revolutionary for SA: the idea of chasing an average so that policymakers can ...