In January 2018 the average prudential balanced portfolio returned (0.57%) (December 2017: -1.49%). Top performer is Metropolitan (1.22%); while EMH (-0.05%) takes the bottom spot. For the 3 month period, Metropolitan again takes top spot, outperforming the ‘average’ by roughly 1.9%. On the other end of the scale Investec underperformed the ‘average’ by 1.6%.

Will the ‘sweet spot’ soon be over?

What do you do if you are not patient enough to wait for your theory to realise? Well when all the SA news media were focusing their political attention on the upcoming elections of the new president of the ANC and it became ever more evident that Cyril Ramaphosa was the clear front runner the imminent strengthening of the Rand was a ‘no-brainer’ for any observer. Investment experts would have you believe that efficient financial markets would have duly discounted this development in the price setting of the Rand, and to some extent this is what indeed happened. The Rand did strengthen from over 14 to the US Dollar to around 13.60 just before the election. But since the election it went on a rampage strengthening to around 11.60 by the time of writing this column. So much for the theory of markets properly discounting certain foreseeable events and hurtful for the impatient speculator.

In the mean-time global equity markets have taken a bit of a beating but for foreign investors the strengthening of the Rand against the US Dollar by close to 20% over the past 3 months has delivered some awesome returns of 20% for the US Dollar investor and around 13% for the European investor. No wonder foreigners are starting to pile back into SA equity but are seemingly wary of fixed interest investments in the face of a rising interest rate tide. Over the past 3 months foreign investors invested R 51 billion in the SA equity market while at the same time some R 19 billion was withdrawn from the fixed interest market. Despite this significant inflow into our equity market over the past 3 months our equity market has not managed to rise but rather the contrary occurred. Well with a market cap of around R 16 trillion, 51 billion will not really move the SA equity market.

Will this sweet spot for foreigners and of a strong Rand soon be over or will we see more of this?