We are halfway through May and much have happened since the beginning of the year. In 2025 commodities like gold and silver shot the lights out, resulting in the mining companies listed on the JSE outperforming the broader US markets, bringing some welcome relief to those investors focused on the South African portfolios. The same pattern evolved at the beginning of this year until the Iran war broke out, causing all equity markets to go down. The recovery in the US market was swift, wiping out any losses over a two-week period and reaching all-time highs again in May. Unfortunately, Resources are taking longer to recover and even our old warhorses Naspers and Prosus are still down over 20% for the year to date. It is clear that Donald Trump is eager to get out of the Iran war, which he started. The high oil price is starting to cause prices of goods and services to rise and the long-anticipated lowering of interest rates is not going to happen soon.
For investors who want to invest new money, things are a little tricky. The rand has weakened to around R16.50 to the dollar, the blue-chip companies in the US have gone up a lot and the Resources companies in SA might stay range-bound for some time without any new stimulus trigger. Bitcoin has come down from around $126 000 to $80 000 and for crypto enthusiasts this offers a good entry point, especially now that the legislation that will regulate crypto in the US, called The Clarity Act, will likely be implemented. This will give more legitimacy to crypto and ensure some oversight to prevent bad actors from harming consumers.
It is tempting to wait in cash during periods like we are in at the moment, waiting for shares to come down again before we invest. Unfortunately, with the current momentum in the technology sector, where we all have to be invested given the future being created by AI, prices can go up a lot before such a pullback in prices occur. The reason for this is the fact that the earnings of these companies, like Nvidia, Alphabet, Amazon, Broadcom, etc., are so strong that they easily justify the price they trade at. We have to fall back on the lessons learned from the past: longer-term investors have to be disciplined and consistent in their investment plan. Timing the market has never worked. Your aim is to beat inflation and cash over a five-, ten- and fifteen-year period. The managers of the funds you invest in might hold a little more cash than usual during these tricky times but they will keep on buying companies that will trade higher in a few years from now.