The Johannesburg Stock Exchange (JSE) closed an exceptionally volatile and unprecedented quarter at 50483. Weak economic growth and the havoc caused by the Covid-19 pandemic resulted in markets plummeting during this quarter. The retracement was not limited to local markets as global markets also fell and in some instances, even the most well capitalised companies were either forced to or chose to withhold dividends until the economic ramifications of the virus are better understood. The fear, panic and unknown of the virus caused even the most hardened investors to flee to safe havens.
Particularly hard hit were banks and property stocks, with banks experiencing a marked increase in defaults on credit agreements and mortgage bonds. Property stocks continue to be adversely affected due largely to tenants who have been unable to operate and are therefore not in a financial position to pay rentals.
In South Africa, the hard lockdown has had a severe effect on the economy, with wages and salaries being cut in all sectors and even some essential services have not been able to operate. The severity and length of the hard lockdown when compared to other countries’ approaches to the Covid-19 pandemic, has prejudiced our economy as a whole. Additionally, the government’s flip-flop policies have resulted in business confidence reaching an all-time low.
Despite the negative headwinds and panic, there are some pockets of positivity to be found in our economy. Food retailers specifically have enjoyed focused spend with most other retail sectors being put on hold for almost two months. It is in times like these that it is essential to associate one’s self with the best, most capitalised companies. In some instances, this has benefitted shareholders as dividends have continued to flow while other companies have withheld their dividend for the foreseeable future until some level of normality returns. We believe that when the South African economy fully re-opens, there may be a strong recovery across our markets.
Donald Trump continues to lock horns with China over the continuing trade war and allegations surrounding the origin and spread of the Coronavirus pandemic, has also led to increased tensions. Surprisingly, the economies of both China and the United States have rebounded relatively quickly since opening up. China has recovered to almost full production and if the rest of the world follows suit, we could well see a bounce in global markets. Obviously, there are still significant concerns around the trade war and the impact it will have on emerging markets.
Europe, which was hard hit by the Coronavirus, has now started to open and their markets have begun recovering relatively well. There are still lingering concerns in this region around Brexit and how this will affect the European economies.
Globally, interest rates have been slashed in order to try and stimulate economies and there has been a shared interest in pumping liquidity and austerity measures into the systems, which bodes well for equity markets.
In South Africa, interest rates have been cut which is positive for people with debt but negative for people relying on income. We may see further interest rate cuts in the near future.
Oil fell to its lowest level in several decades as global production all but ceased during the pandemic. The over-supply of oil drove prices in some shares to the lowest in recorded history. However as global economies open up, the demand for oil is increasing and a recovery is expected.
Both globally and locally, Governments and businesses have had to adapt incredibly quickly to the changing landscape given how fast the virus spread, and only the most nimble of entities have been able to thrive.
We have been extremely privileged to witness how unified our staff have been as a team, despite the stressful times. I must extend my sincere thanks to our staff compliment who within a matter of hours were able to set up and work remotely, complying with the enforced lockdown regulations. It has been both humbling and an honour to work with a team who have given 110% to ensure that we were able to continue to care for our clients at a level to which they are accustomed.
In adapting to the new environment, we have reduced reliance on internal and client face-to-face meetings in order to comply with the lockdown restrictions. Fortunately, our communication systems and a number of our business processes were already digitized and streamlined. We remain committed to exploring new and innovative ways of improving our systems to ensure that our clients will continue to receive the best possible service.
On a final note, we understand that with all the upheaval and uncertainty many people are experiencing enormous stress around their financial situations and more than ever need trust worthy and experienced financial planners to help them make informed decisions based on their specific needs. Should you be aware of any friends or family members needing financial planning assistance, particularly in these troubling times, our experienced team is always willing and able to provide guidance and advice.
Wishing you and your loved ones continued good health.