Uncertainty 2020.

We have now seen markets recover to almost the levels before the Covid crash. This recovery has taken only two months and the people who bought the market end of March, have made a lot of money. Sasol is up almost 500% from its low in March; City Lodge is up 116%; Growthpoint is up 55%; Satrix Resi is up 78%; and Satrix40 is up 47%.

There must be people who hate this recovery even more than the one we saw in 2009 – all those investors who sold at the bottom, watched the recovery, and are still waiting for the second crash. This is also the time when a lot of people are taking some profits and probably selling their shares to the investors who sold out early and can just not endure the pain of missing out on the recovery.

This is, once again, a lesson for all of us on how wrong we can be about what the market is going to do. A reasonable person will look at this market and just do a little shake of the head. How is it possible for shares to recover so quickly when 2020 profits will be non-existent in many companies? How can anybody be positive about the outlook for the economy when the debt levels of countries are the highest they have ever been? These are questions we cannot answer, but it is well-known that markets can stay irrational longer than you can stay solvent – so do not even try to rationalize.

Something we can indeed expect is that once Covid-19 is part of history, some companies will be stronger and some will be dead. Investors who had cash available at the start of this disaster and bought solid companies will be in a much better position and investors who had a long-term outlook and did not sell any shares will get a decent return. Only those investors who sold out during the panic, will be in a much worse position. Interest rates will remain very low for a very long time and cash will not provide you with a reasonable return.

As far as we can tell, our investment philosophy of matching your investments with your expenditure requirements has worked well during this pandemic. Money you required for shorter-term needs was in cash and money you will only need in seven years or longer in shares. A healthy portion of your longer-term investments were in international markets and this provided you with a fantastic hedge against the depreciation of the rand. We might still see that second crash and we might see Cape Town moving back to Level 4 or 5 lockdown. We might see the rand strengthen some more or we might see it depreciate again. We can just not be sure of what will happen and that is why we advocate a balanced approach to investing at the moment.

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