Quarterly Report End May 2019
We are very happy to welcome Marcel Sandells to our team – Marcel joined us in April 2019 and takes over the important task of receiving our clients on the phone and in our Reception. Marcel will also assist the investment team with all client transactions. Marcel may be a familiar face to quite a few as she ran the Marketing department at Venns Attorneys for many years. We wish Marcel a long and happy future with us at Finlaw.
Our Finlaw family is growing even more [it seems the men are officially outnumbered], as we will welcome 3 new babies to the team in Aug / Sep 2019. Kirsten, who runs with all our offshore administration and processing will welcome twin girls in late August / early September and Stacey, our paraplanner and director, will welcome a baby girl in late September / early October. We look forward to meeting the new members who we know will be in good hands.
In our previous newsletter, we made mention of the fact that the local elections would be over by the time this quarterly newsletter was done – hard to believe it all took place on the 8th of May already! In what is believed to have been the most important elections since 1994, there was very little market reaction. The outcome of the results was largely expected based on opinion polls and analysts’ predictions. The biggest winner, no doubt, was the EFF who almost doubled their support base from the elections in 2014. They may have been a bit disappointed, however, after all their social media and voting campaigns. The DA, who will be disappointed with their fall in support maintained its majority in the Western Cape. It is very clear that both the ANC and DA have a lot of reflection to do as they move forward. The outcome has been mostly market friendly as President Ramaphosa has enough support [we hope] from within the ANC to implement the much-needed structural reforms. Although the ANC’s majority has waned since the last elections, the results have given President Ramaphosa enough internal momentum to shrink his Cabinet and make crucial appointments to key ministries. The announcement of the Cabinet, despite delayed, was mainly positive but it is clear that the retention of some members within the Cabinet is still a sign of a compromised President trying his best to deal with the factions that still exist within the ANC. Hopefully with a more streamlined and effective Cabinet, we see improved and coordinated communication and policymaking.
Confidence [business and consumers alike] should now improve with the election uncertainty out of the way, although a meaningful, effective and durable improvement will depend on the realised delivery of policy certainty. President Ramaphosa has his work cut-out for him but we do believe that by making the right calls in terms of Cabinet selections and leadership positions, promoting policy certainty and improving overall confidence, this country can finally grab hold of all the available opportunities at our disposal and reach our true and life-changing potential. We are aware and caution our clients that this will take some time and we will therefore experience some volatility along the way – we urge you to remain patient and focus on the long-term objective of your investments. The diversification in each of our clients portfolios [as described in the November 2018 newsletter – https://www.finlaw.co.za/quarterly-report-end-november-2018/] provides some downside protection when certain asset classes / regions under-perform due to circumstances that many a time are out of our control.
Globally, we continue to battle with the threat of trade wars between the US and China [and now Mexico it seems!]. These threats create a risk-off environment which in turn means investors sell out of the “riskier” economies with emerging markets [and of course RSA] feeling the brunt of this frantic sell-off. The recent resignation announcement made by Theresa May has also increased the chances of a hard Brexit [no-deal Brexit] – again, this risk-off environment is negative for emerging market economies. The tensions in the Middle East between Iran and the US continue which could have an impact on the oil price and global inflation going forward.
In the first 4 months of 2019 the MSCI World Index [cap weighted stock market index of 1 649 stocks from companies throughout the world] was up over 16.5%. That was the biggest gain markets had seen at the start of any year for over 30 years! This positive run surprised many investors, given the significant sell-off in the last quarter in 2018. These unpredictable opposing movements in the market have made it quite difficult for investors and asset managers alike to gauge where markets are going. In May, we have seen the MSCI World Index come off about 4% from its April high. These swift changes in market sentiment are indicative of a conflicted environment. It seems that the initial run at the start of 2019 suggests that markets were pricing in very little risk, however, as we have seen, there is still plenty of geopolitical risk around.
Once again, we encourage you to stay the course – it seems markets were out of the blocks a bit quickly at the start of this year and this is reflected somewhat in the pull-back we have experienced in May. While we remain cautious, we do believe that the next 5 years will be better than the last.
As always, please don’t hesitate to contact us for assistance.
Finlaw Consulting 31 May 2019
“The stock market is a device for transferring money from the impatient to the patient.”