With investors not having been rewarded for the risk they have taken on over the last five years, many investors have lost patience and moved into money market or specialist fixed interest funds.
Key 2018 Investment Facts:
- The average return across all four asset classes (equities, bonds, cash and property) was the lowest it has been since 1976.
- 63 of 70 assets globally ended with negative dollar returns.
- Not a single equity market worldwide had a positive return.
In the last 114 years in SA, there has been a total of 6 times that cash has outperformed equities over a rolling 5-year period. The most recent 5-year period is one of those as can be seen from the graph below.
Those thinking of moving to cash should consider the next table which shows the returns by investors over the next subsequent 3 years.
The general consensus in the asset management industry is that equities now offer much better value than they have for a number of years. This is due to the fact that prices have increased only modestly, or in some cases have declined, whereas many of the underlying businesses have shown growth resulting in quite attractive earnings and dividend yields. Clearly there are many risks to equity investors, such as the anaemic growth rate of the SA economy, BREXIT, the trade war between US and China, and China’s slowing growth rate, to name but a few, but we feel that these risks are largely “priced in”.
In summary, don’t let all the hard work and patience over the last few years get chucked out with the bath water when asset managers are more confident than ever to meet their mandates over the next few years. Moving into low risk assets will only exacerbate the situation.
