April 2022 Update
F&A Monthly Update | April 2022
2022 is proving to be a testing year so far for investors. This statement is not limited to South Africa, with poor and even negative returns seen almost across the board. We have been here before, with it seeming to be a conversation we have more often than we would like! Interestingly, South African investments (Rand based, local) have outperformed many global positions. So as much as we may be uncomfortable, know that we are even slightly ahead of peers.
As before and as you hopefully know by now, we exclusively build long-term investments, in the full knowledge that uncertainty and volatility will present from time to time. These events are not ifs, but when’s and are an expected and even common occurrence on investment journeys. Put differently, expecting any investment with a long-term growth mandate to perform positively and smoothly over time is unrealistic.
Thankfully, due to our risk-adjusted approach, many of our investments have pulled back far less than our peers have. We encourage you to continue to show patience and understanding during these testing times. Please know that our 200+ investment specialists are monitoring your setups full-time and are likely to come across and take advantage of any mispriced assets which may show up during this period. This should result in positive outcomes for you over the long-term.
For more, please the below from Brendan
April 2022 Update
This month's piece is compiled by Brendan de Jongh, SA Head of Research - PortfolioMetrix.
LOCAL UPDATE
South African risk assets could no longer withstand the volatility being felt globally and fell alongside other markets in April. Given its strong commodity bias, South Africa has been a relative outperformer, but this ironic “safe haven” characteristic began unwinding as investor fears spilled over to local markets. The rand weakened significantly (supporting returns of global asset classes in rands) with continued pressure being felt in the local bond market as yields continued to rise. Given the weakness of the local currency the best performing asset classes for the month were global bonds and global property. That said, these asset classes fell in hard currency terms as rising interest rates, inflationary pressures and a global risk off sentiment hurt performance generally.
GLOBAL UPDATE
April saw several familiar themes extend risk-off sentiment in markets. The war in Ukraine sadly continues, China’s COVID outbreak has dampened economic activity in the country, but pretty much everywhere else inflation continues to surge, driven in large part by higher energy costs. This inflation is beginning to be felt acutely in the UK too as the latest round of energy price rises make their way into bills, adding to concerns around consumers’ financial positions and hence their likelihood of continuing to spend to drive the economy. To combat inflation, central banks are in the midst of a tightening cycle, with rhetoric on future interest rates particularly hawkish. This has served to increase bond yields (and thus lower bond prices) as well as weighing on equities in general. ‘Growthier’ equities have been particularly hard hit given more of their anticipated cashflows lie far into the future, a feature that looks less attractive given current uncertainty.