Investors will have noticed that markets in the US have reached new heights. The question that should be asked is: “Where are these returns coming from?”. It is of even greater importance when one considers that the South African markets have been very responsive to offshore market directions.
At the end of February 2013 the Dow Jones Industrial Average recovered to levels last seen in October 2007 as indicated above. This recovery of the markets has also been spurred by positive home sales figures from the US along with improving unemployment figures. The current US unemployment rate is at 7.7% which is also the lowest it has been since the end of 2008.
Federal Reserve Chairman Ben Bernanke and European Central Bank President Mario Draghi have also been making comments that suggested accommodative monetary policy would remain in force in both the United States and Europe.
This positive performance combined with the positive outlook has lured in new investors who have until now remained on the sidelines. These new entrants are also pushing markets up and helping to sustain the recent rally.
The result of this market activity has been that a firm risk-on atmosphere has pushed up the “riskier” Emerging Markets equities as well, thus benefitting the Johannesburg Stock Exchange.
Along with the positive performance generated by local and offshore markets, investors with offshore exposure have benefitted from a depreciating Rand. Over the 12 months ending 8 March 2013 the Rand has depreciated by 21.41% to the Dollar.
Below we have included the returns from some of the prominent indices relating to South African investment portfolios over the past year.
We continuously monitor our client’s portfolios to ensure that they are positioned correctly to achieve their investment goals and aligned with their risk profiles. This has meant that the market gains have not required us to rebalance or reposition our portfolios or to take profit. We would however recommend that investors who do not monitor and maintain their portfolios consider whether their current positioning is still in line with risk profile and long term goals.
