Investing is a lot like going to war

“Investing is a lot like going to war – you experience long periods of absolute boredom, interspersed with short periods of sheer terror!” Anonymous

What started off as a strong month, February 2020 will forever be remembered as the month that the Coronavirus struck markets! In much the same way as fear of the spread of the virus has caused panic across the globe, fear of a global slowdown in the coming months caused panic across markets, resulting in some of the largest sell-offs since the Global Financial Crisis of ‘07/’08.

Puzzling was the performance of gold and platinum shares – the backbone of 2019’s rise and considered a bastion of support in bad times – were heavily bashed towards month-end. But the sell-off extended across the board, from local equities to global equities, bond markets to property, even cryptocurrencies, as investors reset markets to the levels of August last year.

Last week’s Budget Presentation in Parliament by Finance Minister, Tito Mboweni, did bring some cheer on Wednesday, but this was swiftly overshadowed by the virus concerns.

Minister Mboweni’s proposals were broadly well-received, particularly as Government were simply regarded as having reached the upper-limits of the “Laffer Curve” – the point at which increasing taxes simply yields a lower rate of tax collection, as the wealthy and most heavily-taxed in a society “vote with their feet”. The juggling act performed by our Treasury, amidst an extremely challenging environment, clearly points to a “Growth Agenda” for Government, and we hope to see a more business- and market-friendly policy framework following suit.

We have long been of the opinion that the global growth cycle may be getting “long in the tooth”, and subsequently have preferred defensive assets and positions across the full range of Octagon Funds – both local and offshore. As such, our investors have experienced a far more muted drawdown over this period. Our overweight positions in cash and shorter-term income assets proved their worth with pullbacks limited to the low single-digits, even in our more aggressive strategies over the past week. And while markets are effectively ‘on sale’ today, we do not have to increase the risk in our funds just yet in order to capitalise on the hopeful recovery when it comes… a smaller drawdown means less of a gap to recover, and we like it that way!