Looking at 2021

Here at JWR we have started the new year on a very sad note. One of our beloved colleagues has passed away from Covid-19. She was a beautiful person and we send our love and light to her family and friends.
There is no doubt that 2021 will be another challenging year. It seems that the winners will be those countries that can master the logistics of the vaccinations the best. Sadly, South Africa is far behind in this race and we can expect to start our public vaccination roll-out in April 2021 only. This will most likely see our country being blacklisted as far as international travel is concerned, as only those people who can prove that they have been inoculated will be allowed outside to play.

2020 has introduced a new super villain into our lives, this one in the biological sphere. It joins the two we are already very familiar with, namely corrupt governments and financial mismanagement, i.e. the 2008 financial crisis. But with all the angst and misery 2020 has dished out, it has also given us relatively good returns on most asset classes.

These are some of them:

JSE +4%
S&P +16%
Nasdaq +44%
Gold +25%
Oil -22%
R/$ -4%
R/Euro -13%
SA Inflation 3.2%
SA Cash +5%

We are seeing big changes in the USA. On the 6th of January Trump supporters stormed and breached the security of the Capitol Building where lawmakers were finalizing the approval of Joe Biden as the new president of the country. We have seen the same hooliganism from our own EFF and AWB in the past and the way these minority groups can change a place that should be revered, into a circus.

It would be very easy to become despondent at a time when our emotions – and even livelihoods – are attacked on all fronts by all these events which are largely out of our control, but we have to remember that this too shall pass and lessons will, hopefully, be learned.

Turning to the investment expectations for 2021, we can only hope that South African shares will bounce back from very cheap levels. We also do not expect the Nasdaq to have another stellar year, partly due to lofty valuations but also because the Democrats now have total control of the US government. Taxes will increase and regulations against big technology companies will be stepped up. We will, however, see more stimulus measures being rolled out to benefit smaller companies, especially those impacted by lockdowns. We may also see better trade relations between the US and China.

As an investment destination South Africa remains problematic. Not only are we not part of the Fourth Industrial Revolution, but we are also stuck with a government where the political will seems to favour socialism rather than capitalism. This will put pressure on the SA rand and wealth creation over the longer term. At JWR we understand that every client has a very personal life path and that their investment portfolio should reflect that. As a rule we advise clients to invest shorter-term money in local investments, i.e. in the currency they will spend their money in to eliminate currency volatility and also to limit overall volatility. It is, however, critical to have longer-term money exposed to other areas of the world and industries looking to the future, namely biotech; electric and self-driving cars; artificial intelligence; online commerce; remote learning; space travel and tourism; artificial meat; online gaming; computer-processing hardware; data streaming; data storage; and many more.

As always, most of our clients need a well-diversified portfolio. We rely on fund managers to select the shares, bonds and cash instruments that will provide us with the best risk-adjusted returns possible. Our primary aim should always be to beat inflation (currently 3,2%) consistently after all costs, and to never experience a permanent loss of capital. If we can take care of those two things, the superior returns will follow automatically if we remain patient.

Last, but not least, we have to remember that money is important, but not all-important. I believe that there are very few people who would prefer to live in the lap of luxury but without someone to love and share it with. And how many times have I seen people living in absolute poverty, but smiling and laughing because they share it with people they love.


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