COVID-19: ‘going viral’ takes on a new meaning
Recently, Jeremy Gardiner from Investec Asset Management (renaming as Ninety One, in recognition of its date of inception) shared with us developments unfolding on the local, international, political and economic fronts. He expressed concerns about the Coronavirus and its potential threat to the global economy.
Following his talk, as I was about to address the audience, a notification came through confirming South Africa’s first case of Coronavirus … in Hilton, my hometown.
All the hype suddenly became a reality.
Not unexpectedly, panic set in, and people reacted by heading to the shops for supplies, hand sanitisers being highest on the list of priorities – stores were sold out in minutes. My wife, Angela, described the scene at our local Clicks, where queues snaked outside the door as people stocked up.
Unfortunately, global markets took a significant knock as a result of COVID-19. This, coupled with Saudi Arabia’s drastic move to drop to the price of Brent Crude Oil, both so-called ‘black swan events’ (unexpected occurrences with a major impact), has left the markets extremely volatile. Much uncertainty prevails over the impact on the world’s economy of the spread of the Coronavirus. We have seen moves of 5% or 6% in a day, demonstrating the magnitude of the uncertainty. The rand weakened, primarily as a result of foreigners selling their emerging market investments.
Added to these woes, persistent negative news means that South Africa remains in a difficult place. A positive was our Finance Minister’s annual Budget Speech. We were expecting adverse tax increases, and were pleasantly surprised by Tito Mboweni admitting that the only way to resolve our crisis is to cut spending, as he plans to do. Moody’s rating agency is questioning if the proposal to cut the public sector wage bill will be possible to implement, though, with pressure from the unions.
At Chartered, we are aware of the turbulent environment we find ourselves in, and continue to review our clients’ Retiremeant™ plans while encouraging them not to allow emotions to shape decisions. Last year the positive returns surprised us all – none of us would have predicted these after closely following media reports.
Chartered supports the drive to take funds offshore; however, with the volatile rand, caution is advisable, as are carefully planned and executed decisions. The rand- dollar fluctuated by 16% last year between its high and low; had you changed rands for dollars this time four years ago, you would still find yourself in negative territory. We feel that, if the decision to invest offshore is to be made, it should be with a ten-year time horizon.
Thank you for the continued positive engagements with your Planners. Together, we will charter these rough seas.