Investment Trends Cheat Sheet

A new year has arrived. With it, the usual mix of opportunity and risk presents itself.

Whilst you may have gone on holiday over December, your money didn’t. Heritage Wealth Partners remains fully focused on ensuring that your investments are creating wealth and being managed at an appropriate risk level.

The dichotomy between the markets and the economy remains wider than ever. Driven by the printing presses of central governments around the world, some believe that we are seeing an asset price bubble in the markets. 

Certainly, the rally in Bitcoin and some institutional acceptance of this asset class suggests that investors are nervous about the extent of stimulus being pumped out by central banks, which looks set to increase under a Biden administration. They are currently putting together a $1.9 trillion “American Rescue Plan” which would include a further payment of $1,400 to most Americans.

To kick this year off, we wanted to give you a cheat sheet of key market facts to debate at your next socially distanced braai:

• The Rand is still wearing a few Band-Aids
  • After nearly flirting with R20/USD in early April, the Rand has strengthened by 21% (R15.20/USD at time of writing) but is still around 7% weaker than it was a year ago
• Global tech investments left the rest for dead…
  • The Nasdaq (tech-heavy stock exchange in the US) ended 2020 over 42% stronger, finishing off a watershed year for the tech sector 
• …but there are concerns about regulation
  • China has spooked investors, with Jack Ma still missing and other Chinese giants coming under scrutiny (this drove Prosus and Naspers to finish among the worst performing JSE Top 40 shares)
  • Antitrust pressure on companies like Facebook is likely to intensify under a Biden administration
•  Platinum shone the brightest locally
  • The top performing Top 40 companies included a strong helping of platinum miners, but only three companies managed to return over 20% for the year 
• Property wasn’t safe as houses
  • The local property sector was the worst performing sector over 1 year (-34.5%) and 3 years (-20.7%)
• The largest local equity funds performed poorly 
  • Allan Gray Equity (-0.2%) and Prudential SA Equity (-4.1%) both did poorly and names like Allan Gray, Prudential and Coronation were punished by investors with significant capital outflows
• Bonds did better than equities, helping Balanced Funds outperform General Equity funds
  • JSE All Bond Index (+8.7%) outperformed the FTSE/JSE All Share Index (+7.0%)
• Finally, even the best local funds couldn’t come close to offshore returns
  • Best performing local equity funds could only manage a return of just under 20%

Against this backdrop, we are incredibly proud to report that our clients doubled their money in the Unicorn Fund in 2020. Unicorn returned over 100% in ZAR and nearly 95% in USD. These are returns that would normally take several cumulative years to achieve in the market.

Whilst it is true that overall market levels have risen to the point where there are clear risks, it is also true that carefully selected stocks can drive strong returns. As the world continues to navigate challenging times, the power of active wealth management has been laid bare.

We cannot be sure what this year will bring, but you can be sure that Heritage Wealth Partners is staying on top of investment trends and ensuring that your investment structures are optimised.