A brave new World

Author: Menachem Kay, Chief Executive Officer and Senior Financial Advisor

This was the title of a novel written in 1931 by Aldous Huxley. I honestly cannot think of a more apt quote to describe this new world we are currently experiencing and that will, no doubt, be part of our foreseeable future.

Against most people’s expectations and against the apparent wishes of some of the EXIT voters themselves, Britain has voted to leave the European Union. Markets do not like to be surprised and they were absolutely shocked by this result. The pound has since been trading at the weakest levels in decades – levels not seen since the 1980s. Markets around the world plummeted. Our market was by no means spared, with investors dumping riskier assets and flocking to the relative safe haven assets of gold, US dollar and US treasury bonds. With sentiment being the major driver of markets over the short term, higher levels of volatility are likely to continue for the next while.

The domestic landscape was also not short of drama. On the same day as the BREXIT referendum results, the ruling was handed down that President Jacob Zuma would ‘get his day in court’ and would have to answer to the numerous charges against him. It is against this backdrop that we are hurtling towards the upcoming municipal elections, and all the posturing and electioneering it brings.

In volatile times like these, we are often asked what should be done to investment portfolios. For the most part the answer is, as little as possible. The most effective way of navigating such volatility is by ensuring that your investment portfolio is correctly balanced before it happens. Obviously we cannot always know in advance when a crisis will occur, and so balancing a portfolio, with appropriate exposure to the various asset classes, is vital.

As often communicated to you, we believe in the value and benefits of diversification, and pride ourselves on our portfolios’ breadth of holdings. We are secure in the knowledge that your funds and investment strategies will maintain through this period and provide you with the optimal risk/reward profile.

Events like this often herald unique buying opportunities, as assets present superior value propositions after a correction. For now, the advice is to sit tight, not make any decisions based on heightened emotions, and allow the fundamentals within markets to gain traction.