“Guptas, Hawks, Gordhan, Junk Status, State capture”, terms with which you are now probably acquainted. Unfortunately, these terms do not only make their way to news headlines but also cause disruption in capital markets in the form of market noise in the short term.
Case in point the “Nene Gate” of December 2015 which destroyed value across the JSE. At the time everything seemed doom and gloom in our country, however, in spite of the market noise, things calmed down and opportunities presented themselves.
News on the political front seems somewhat similar to a seesaw these days. It has become almost the norm that the positives are followed with what we call “own goals”. For example, we recently had a very successful and competitive local government election and we managed to avoid a downgrade by the rating agencies (although they will re-evaluate their decision later this year). Things were looking good going into December, however once again we scored a “own goal”. Some of the decisions by our political leaders have really dampened the mood and things are starting to look bleak again.
What is our take on these shenanigans? We generally take a long term view when advising on our client’s capital and do not believe that it is prudent to position portfolios that may benefit from short term volatilities. As always, we believe that diversification remains key and sticking with fund managers who have experience managing money through economic and political cycles will be the most beneficial to you.
Our message is simple: stick to your guns as this too shall pass.
