The last quarter of 2019

We will soon be in the last quarter of 2019, from where we will be looking back at mixed results after we started the year with high expectations for a recovery in our economy and our political situation.

The biggest problem remains unemployment (see graph below). And then there are the unresolved local and international issues; which give rise to the declining business confidence levels; which in turn result in even lower investment and higher employment. And so the death spiral continues.








We are in the midst of the longest declining business cycle ever (see graph below) and we have a right to feel gloomy. We must, however, remember that this bleak period will also pass and that we are at very oversold levels in our equity market at the moment.









If we look at returns for the year to date, we see the JSE up 4%, the S&P500 in the US up 19% and FTSE in the UK up 8%. Our currency is around 4% weaker against the dollar but not much changed against the pound and euro.

Gold and platinum stocks have been the best performers so far this year and general retailers the worst. As investors, our best-positioned portfolios have been those which provided enough cash and other interest-bearing assets like bonds for our shorter-term expense requirements, with only the excess invested in equities. It has also been important for the equity investments to be geographically diversified, to smooth out the volatility risk of this asset class. The biggest mistake one can make now is to abandon equities altogether. The time will come when equities will bounce back from these oversold levels in South Africa and then you have to be in them to benefit. It is also true that there are some sectors in US equities that are too expensive and to rush into them will end in tears.

For the longer-term investor with patience, the most powerful investment approach is still to match your assets to your liabilities and to see yourself as an international investor and diversify.

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