The Diversified Portfolio, and the Best Performing Asset Class over One Year

The Diversified Portfolio, and the Best Performing Asset Class over One Year 

Shortly after every month, I usually glance at the latest returns of the various investment markets, as well as the recent performance of client portfolios, and our discretionary managed investment solutions. 

This month-end was dominated by our elections last week, as well as the coalition talks.

One pillar of financial behavioural finance is bias - and how our perceptions (no matter how well intended) are different to reality, and simply said, sometimes wrong. 

Allow me to illustrate this by asking you the following questions.

1. With the Rand weakening as much of late, and the end of May being immediately just after our voting day with the unusual election results by then coming in - by how much did the Rand weaken to the US Dollar over the last year? 

2. SA Listed Properties incorporating commercial, retail and industrial properties, really suffered during Covid19. SA Listed Property faced many known headwinds the last year, including higher interest rates and increasing costs, by how much do you think you would have lost out, had you been invested here in local SA listed property, compared to say offshore markets - that did very well the last year, and that was supported by a weaker Rand? 

Looking at markets to the last month over the short period of only a year, there are some rather interesting individual results.

When one looks at market performances over the last one-year period, to the end of last month (May), the blend of a diversified portfolio would have shown good results overall.

Interestingly, two factors stood out for me, in answering the questions posed above.

Firstly, the Rand strengthened by around 5% over one year, and

Secondly, the local SA-listed property sector was factually the best-performing asset class over the last one-year period, to the end of May 2024, also outperforming offshore share markets.      

Looking more closely at the local listed property sector, Old Mutual SA Quoted Property Fund Manager Evan Robins notes that “company results released over the quarter supported our view that domestic property fundamentals are stabilising. Rental reversions were materially less negative for all property sectors and vacancies and domestic property valuations improved slightly. Using valuation metrics based on earnings (not dividends, as many REITs now retain some income) and discount to NAV, the sector is cheap to fairly priced. On an implied value per square metre basis, domestic property is well below (accelerating) replacement costs. Fundamentals in some property sectors may have stabilised contingent on economic stabilisation. Consequently, there remains long-term value in the sector which requires domestic growth to unlock”.

Naturally, with inflation rates coming down, this will further support the sector.

Overall, the key takeout is that the blend of an appropriate diversified portfolio as in place in our clients’ investment portfolios, is a proven beneficial approach over time.

February 2024 Tax Certificates | 15 July SARS efiling Tax Season Starts

The regular tax certificates for February 2024 year from the various product providers started rolling out this week, although not all are available.   

The SARS efiling tax season dates were announced this week, starting 15 July 2024 for all taxpayers. 

 Old Mutual Chief Economist Latest Views   
 
Old Mutual chief Economist Johann Els shares his latest thoughts.
 
On slide 4 within the global context, Johann shares his view on the stronger global economy, interest rate cuts remain expected;

After Johann looks at improved US inflation data, on slide 8, he comments on the local macro environment concerning the expected interest rate cuts and a strengthening Rand.
 
Johann also had a recent TV interview via ENCA about why he believes interest rate cuts should not be delayed for too long, which you can watch by clicking on the link below;
 
Pressure mounting on SARB to drop interest rates - eNCA

For his on the elections results on slide 9:

Stanlib, Kevin Ling's View on Elections and Interest Rates

Stanlib chief economist Kevin Lings shares his view on our elections, and how he sees the coalition talks. Sharing a rounded view, he also comments on our lower inflation data coming through.
 
You can listen to his podcast by clicking on the link;   

Markets remain wary as SA election results bring surprises and uncertainty - STANLIB

Friday Food For Thought