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Welcome to Taking Stock
Autumn 2019

Sangeeth SewnathMay 2019
By Sangeeth Sewnath, Deputy Managing Director

In 2018, investors were reminded how volatile markets can be. The first few months of 2019, however, would have served to restore your faith in the stock market, provided you had persevered and stayed the course. The All Share Index, despite lagging global equity markets, celebrated its best quarter in more than a decade by rising 7.1%. Many investors have their advisors to thank for convincing them to remain invested.

I recently had the privilege of returning to university for a few weeks. It wasn’t time off, but the time away allowed me the luxury of reflection. For many people, relationships – both personal and professional – are a key determinant of happiness. I had time to consider the enduring relationships we have built with our advisors over the years and, in turn, the relationships they have with their clients. Many investors would have needed a solid partnership with their advisor to navigate the turbulence of recent years. I appreciate that this time away allowed me to acknowledge and be grateful for the strength of these trusted relationships.

The other benefit of being away from my day job was that I was – albeit briefly – removed from the daily political and economic noise. Being confronted non-stop by currency and market fluctuations, and political rhetoric (especially in the lead-up to a general election) only serves to distract from long-term investment goals.

So, stripping out the noise, what lessons can we learn about markets from the gains over the first quarter and the dreadful final quarter of 2018? We now know that the drawdown at the close of last year was a correction (a short-duration market decline greater than 10% but less than 20%) rather than the start of a bear market. Research by Jeff Desjardins titled ‘The Anatomy of a Market Correction’, which analysed US market data from 1980 to 2018, provides some fascinating insights into corrections.

Firstly, corrections happen on average once a year. It lasts approximately 76 days and generally the average decline is in the region of 15.6%. Historically, only 14% of corrections signalled the start of a prolonged downturn.

Most tellingly and providing yet more evidence that investors should not be distracted by short-term news flow, the report demonstrates it’s time in the market that counts rather than trying to time the dips. Relating this back to the South African context, by timing the dips investors generally miss the best days. In fact, if an SA equity market investor were to have missed the 20 best days since 1999, their return would have been less than half (5.15% p.a.) of what it would have been if they had remained invested (12.48% p.a.) over the 20-year period!

With so much noise assaulting us daily, real investment insight is rare. I am privileged to share with you in this edition of Taking Stock thought leadership from Philip Saunders and Sahil Mahtani, which explores themes that are set to fundamentally change the way we approach investment. Their article on de-dollarisation focuses on the ongoing moves to erode dollar dominance and the shift to a multi-currency international monetary order.

John Stopford and Jason Borbora-Sheen cut through the Brexit noise and consider how to position portfolios against the backdrop of trade wars, fears of a recession and the maturity of the business cycle.

Our research into living annuities has also elicited many additional questions from our advisors and in this issue, we unpack the merits of bucket strategies. While they may feel intuitively ‘right’, our research reveals that they are not a silver bullet portfolio management technique.

With the election also now successfully behind us, this edition includes both Nazmeera Moola and Jeremy Gardiner’s views on what the future holds for our beloved country.

In conclusion, we still haven’t seen real investment return to the stock market – despite the bullish start to 2019. Household deposits are sitting at approximately R1.2 trillion today, up from R700 billion three years ago. We need to help investors identify the long-term opportunity and convert that cash into real investments.

We, along with advisors, have a duty to aid investors find solutions for a better tomorrow. While we have written many articles to help them achieve their investment goals, we also want to reiterate that we are available to assist in any way that can add value.

With the SA market finally having shown signs of life, I am reminded of the old saying: if not now, then when? if not you, then who?

Thank you for your continued support.



Sangeeth Sewnath
Deputy Managing Director

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All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an adviser or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation or warranty, express or implied, with respect to the correctness, accuracy or completeness of the information and opinions. We do not undertake to update, modify or amend the information on a frequent basis or to advise any person if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down.

This document is the copyright of Investec and its contents may not be re-used without Investec’s prior permission. Investec Asset Management (Pty) Limited is an authorised financial services provider. Issued by Investec Asset Management, May 2019.