Marriott Income Fund Presentation | Good Overall Synopsis of the War from an Investment Point of View Over the past year, I have shared several notes on Income Funds that offer some protection compared to more traditional Money Market funds during a reducing interest rate cycle.
With the war in Iran continuing, in this regular update, the Marriott team released this short 5-minute video late last Friday on their Income Fund.
They shared:
“We continue to monitor the situation closely.
Our stocks are all defensive in nature, and we hold no direct investment in Asian or Middle Eastern companies.
Lourens Coetzee, one of Marriott’s investment professionals, has prepared this short video to share Marriott’s insights on the Iran conflict and the opportunity for our income funds.
While markets have been volatile, our income funds remain well-positioned - we’re using this volatility as an opportunity to lock in real yields at compelling levels and improve investor outcomes over the next two years.
We hope you find this update helpful”.
While this applies to Marriott, I think it articulates overall market conditions well, not only for Income Funds generally, but also for all-around market conditions too. |
Oil Markets Remain in Backwardation
Tied into the Marriott presentation, which showed international oil prices sold at a forward rate of $75 in one year’s time and $70 in two years’ time, I next share the even shorter-term graph on oil futures below.
After the War in Iran, which has been going on for four weeks, oil futures remain showing a steep backwardation through this week – and therefore near-term prices are well above longer dated contracts (the graph below) - a signal that markets still see supply disruption as temporary;
Therefore, oil markets still expect the impact of the war to be passing through (“transitory”).
At the same time where it is expected to take some time to work through, back at home in SA, next week Wednesday, we expect a sizable petrol price increase - and so in line with last week’s note, I encourage you for your personal budget to fill up your petrol tanks, and to keep them full between now and next week to give some short-term budget relief.
Some Graphs from Your Planner To Serve as a Reminder of What You Already Know
History is consistent: if you can stomach the initial downturn without selling, returns have ultimately been positive. We are four weeks into the conflict with Iran, and with Trump projecting a four-to-six week duration, the light at the end of the tunnel may be closer than it feels right now.
The first graph below shows annual S&P 500 returns during periods of war.
The second graph below shows that US share markets have historically bottomed within 12 to 20 days of an initial geopolitical shock.
Given we are four weeks in, history suggests that we may already be at, very near the floor, or even past the worst. Of course, there are no guarantees, but this is the historic precedent.
(This graph is prepared to the end of last Friday)
Our Discretionary-Managed Solutions During This Time
The lowest market levels since the war thus far were recorded last Friday. By that stage, our discretionary-managed funds at the worst time, from peak to trough over the last month since the war erupted, returned between 0% and -5% between the different options. This follows the very strong investment results we recorded over the last year.
In comparison, by last Friday, the World MSCI Index (world stock markets as a whole) had lost -10% over the same period, and the US S&P market had lost -5%. Therefore, we are very satisfied with the substantial protection embedded in our funds, which have, over this period, far outperformed the open markets (and competitors for that matter) as a whole.
To the end of the month
After all the volatility, market declines and uncertainty, this is our outcome.
I am “happy” with this consideration.
Diversification Is Not Overrated
When markets run hard, concentrated investors love to perform, and sometimes make the rest of us feel too cautious about staying diversified. Then something breaks, and you remember why diversification exists. As Warren Buffett famously said, “only when the tide goes out do you see who was swimming naked”.
The real trick is emotional consistency. Not letting a big win convince you that you have figured something out permanently, nor letting a rough stretch make you feel like a failure.
Diversification is not about maximising returns. It is about staying on the tracks long enough for compounding to do its work.
Let’s keep in mind that almost exactly this time last year, by early April 2025, the US S&P market actually gave back more than -20% from peak to trough due to the Trump Tariffs. Yet the very same S&P market ended the year up just over 15% overall through all the swings and roundabouts.
Markets remind us that uncertainty is normal—but panic is optional.
Scripture teaches that wisdom is not found in predicting the future, but in responding faithfully to the present. History rewards those who remain disciplined, diversified, and patient—qualities that align closely with biblical stewardship.
“The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.” (Proverbs 21:5)
Staying invested through uncertainty is rarely comfortable, but it has consistently proven wiser than reacting emotionally to short‑term fear.
FRIDAY FINISH LINE
