A Look Back at the Quarter Ending March 2018

Without doubt, it has been a volatile several months – and investors can be forgiven for feeling slightly unnerved by global political developments.

Taking a few steps back, January was a good month and felt like the continuation of the end 2017 bull-run. However, the mood changed markedly in February 2018 – and we were reminded that volatility can rise and stocks can go down…as well as up!

March proved to be a particularly tumultuous month for global equities as the consequences of the Facebook data abuse scandal and the potential US/China trade war impacted investors’ risk appetite. By the end of the month, it became almost commonplace to see 2% swings either way…such was the day-to-day volatility.

On the local front, the SA Reserve Bank cut the repo rate 25bps to 6.50% in March. Notably, CPI inflation moderated further, reaching 4% y/y in February.

Whilst the rand strengthened dramatically in December following the election of Cyril Ramaphosa as ANC President (and several immediate risks to the exchange rage have been pushed out) there are a number of ongoing concerns:

• While new management of state owned institutions (SOEs) should provide some stability, these entities are still fragile.
• Some SOEs remain weak.
• Growth is yet to accelerate.

For the Quarter:

SA Equity (JSE Alsi) returned -6.0%.

• Financials returned -3.6%;
• Industrials returned -8% (driven mainly by the decline in some of the large rand-hedge stocks such as Naspers [-16%], British American Tobacco [-15%], Richemont [-4%] and Bidcorp [-13%].
• The All Share Resource Index was down -3.8%.

Global equities were down -5.4%.  Across the asset class spectrum, only cash and SA bonds gave a positive return in the Quarter.

Despite the initial euphoria around the prospects for synchronised global economic growth during 2018, investors have become more cautious and market volatility has increased significantly.

Source:  Coronation Fund Managers, PortfolioMetrix