Local is Lekker Again

Local is Lekker Again | Local beats Offshore over 5 years

This time last year, most South Africans had much apprehension, apart from basking in the afterglow of winning the 2023 Rugby World Cup. There was little reason to smile, as the country was still strained by electricity disruption, and interest rates and fuel prices were higher. At the same time, political uncertainty increased ahead of the then-upcoming key national elections.

Few would have thought that by the end of April this year, we would now see South African equities (shares) performing better than Global equities, on a rolling 5-year basis, for the first time in a decade

To make the comparison fair, the world markets as a whole (MSCI All Country World Index), as stated in Rands, are compared to the local JSE (also stated in Rands).  

Cumulatively, there’s still much underperformance to catch up, where the SA market de-rated from 14x forward earnings to high single digits over this period, while the offshore CWI re-rated from 14x to 17x.

I am a believer in “the reversion to the mean” (in the absence of any contrary factors), which is that outperformance is most often cyclical and little is permanent, much like life itself.

This outperformance of the local market against the world stock markets as a whole has come through since the middle of last year, as seen on the graph.

In anticipation and appreciating the value of the local market, in our discretionary managed SIS and PWM solutions, over the last few quarterly review updates to clients, I have mentioned that since late December 2023, we have slowly trimmed back our offshore and specifically US exposures.

This was to reduce our previously overweight offshore equity allocations, largely held for the last decade, to more neutral exposures (and now not underweight either). While this may have been relatively unpopular given the negative sentiment on SA early last year, it certainly has provided good investment performances in adding value to client portfolios. This year, with the weaker US Markets on the Trump Tariffs - it’s further stood our strategies in good stead over this year-to-date thus far too.  

As Warren Buffett said in his 2001 shareholder letter, “It's not about predicting the rain, it's about building an ark". Focusing solely on anticipating difficulties isn't enough; proactive measures and building resilience are crucial for navigating challenges.

Sell in May? More Like Stay in May after a US Election Year

Looking offshore, the often-quoted adage is to “sell in May”, as global markets have historically retreated in May with some regularity. However, this isn’t the case after a US election year.  

The chart below from the Carson Institute shows the average monthly returns of the US S&P 500 market from 1950 to 2024, comparing historical trends across different periods: all years since 1950, the past 20 years, the past 10 years, and post-election years.

May has historically been a strong month in post-election years, delivering higher average returns than other periods.

Of course, this is only looking at history, and this year could look different as tariffs stir up turbulence. But at the same time, one should remember that time in the market beats timing the market;

Personal News from Jurie

Next week we are out of the office from Monday to Wednesday, at our national PWM Conference in Cape Town. We are back in the office on Thursday next week.

If you know someone who could benefit from personalised financial advice, pass on my details below. Let’s help them reach their financial goals together! 💼✨
🔗 🤝Jurie de Kock CFP®

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