October 2022 Update
F&A Monthly Update | OCTOBER 2022
October, and now moving into November, has seen welcome relief from markets after a testing 9 months for investors. Globally, the S&P 500 (Arguably USA’s most tracked equity index and a great global proxy) had pulled back as much as -25.25% from the turn of the year to the end of September. A welcome recovery of 10.16% has been enjoyed since the beginning of October. Locally, the JSE ALSI pulled back -15.63% from 1 Jan 22 before recovering off the lower base by 15.66%. Big numbers from a market nervous of inflation, interest rate hikes and general uncertainty.
In response to market moves, we have adjusted our weightings to various assets with an updated Portfolio Rebalance, as covered in our previous monthly too.
We are acutely aware that investing is a long-term game, exceedingly difficult at times, but rewarding to the disciplined. Times like these are guaranteed and built into our multi-asset, diversified strategies. Suffice to say very few of our investors have experienced anywhere close to the volatility shown above, but to say the ride has been a smooth one this year would be fiction.
Simple to give, but harder to follow advice; we would encourage ongoing patience in the face of this volatility.
Please feel free to give us a shout if you would like to chat about the above!
October 2022 Update
This month's piece is compiled by Brendan de Jongh, SA Head of Research - PortfolioMetrix.
LOCAL UPDATE
The South African (SA) equity market fared slightly better than offshore equities in what has been a difficult month for risk assets globally. Although SA equity outperformed developed markets it underperformed the broader emerging market index driven by underperformance in the resources sector. The best performing asset classes for SA investors were SA cash and bonds as they both provided positive returns. Local bonds performed relatively well in a volatile August as global markets struggled to digest the prospect of further rate hikes. Local and global property were the worst performers with returns of -5.4% and -4.4% (in ZAR) respectively.
GLOBAL UPDATE
August saw another round of central bank rate rises across several economies. Although the US didn’t have a policy meeting, a speech by US Federal Reserve Chairman Powell in late August reinforced messaging around the Fed’s determination to continue to raise rates to reduce inflation. Inflation did show signs of slowing in the US, although it continued to tick up elsewhere as further Nord Stream gas pipeline disruptions by Russia pushed gas prices towards all-time highs in Europe. A trip by U.S. House Speaker Nancy Pelosi to Taiwan raised geopolitical friction between the US and China, but was largely eclipsed by inflation, rates and gas price worries by the end of the month. Higher interest rate expectations resulted in rising bond yields and falling prices, thus negative returns for bond investors. It also impacted on equities as the possibility of a recession loomed nearer.
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