Developing from our earliest childhood experiences, the phenomenon of always wanting the newer toy or the bigger house, or fancier car even if the current one is perfectly fine, Shiny Object Syndrome (SOS) has impacted each of our thoughts and actions in more ways than we can count.

The repetitive distraction brought on by the ongoing belief that there is always something new worth pursuing is what drives human beings. Yet we tend to overlook how abandoning what we have in favour of the shinier object often comes at a far greater expense.

The past few years have thrust Shiny Object Syndrome into the spotlight – particularly for South Africans. Considering the myriad ways our governing party has failed to deliver and the opportunity costs thereof (let alone financial!), investors on the southern tip of Africa may well have been justified in focusing their attentions elsewhere.

But then came 2022.
In one, short statement, this year has not been all that bad to have been South African!

Granted there have been dark times this year when it may not have felt this way, and you may even be questioning if I took my meds this morning! But South Africa has been largely insulated from the world’s geo-political risks and the full-extent of asset price corrections seen elsewhere – ours’ is a far “less-worse” outcome.

Taking an objective, unemotional view on a number of indicators within the local economy highlights just how South Africa is emerging from this annus horribilis in better shape than most:

• On the inflation front, even though our inflation numbers have exceeded the upper threshold of the targeted band, South Africa’s inflation problem has been a smaller one than most. Where our peak of 7.8% certainly exceeded the 6.0% upper limit, countries like the US saw their inflation peak above 9.5% against a targeted range of just 2.0% – 2.5%. Bringing inflation back into an acceptable range is a painful process, and the greater the breach, the tougher it is to correct. The resultant actions of our central bank in hiking rates have therefore been softer, and both the magnitude and pace of interest rate increases here at home have been less aggressive than the rest of the world. Furthermore, our SARB’s decision to start rate hikes in November last year put our economy in a better position to ease off sooner than others.
• A positive outcome of the SARB being ahead of the curve has been the robustness of our bond market this year. South Africa is regarded as having one of the deepest and most-evolved bond markets in the emerging world, and our local fixed interest assets have withstood the ravages of 2022 rather well. To date SA Bonds continue to trade positive, and with yields on government bonds running at more than 10% p.a., along with local cash and money market instruments paying around 7%, South African fixed interest assets have played a crucial part in propping-up local investments (and remain difficult to ignore – think ‘Shiny Object Syndrome’!!)
• Equities tend to come under pressure when interest rates are rising, and with this year’s rate-hiking cycle being the most concerted effort ever by global central banks, the corrections on equity markets have been dramatic. What started off as a tough January for markets when Russia invaded Ukraine, only got progressively worse for equity-investors with markets falling beyond 30% at their worst. Our humble JSE was not spared the carnage, but the losses on the local bourse were significantly more muted and touched a level some 11% down from last year’s highs. (At the time of writing this, the JSE All Share is trading back at the same levels it was at the beginning of January).
  Which begs the question, where does all of this leave us as we hurtle towards the end of the year?

I keep reminding myself that this is all cyclical – it always is. And while this may seem obvious, it is far too easily overlooked – particularly in those heady times of fear and panic. But remember this: Good times lead to high inflation; high inflation leads to higher interest rates; higher interest rates lead to bad times; bad times lead to lower inflation; and lower inflation leads to good times.

And so, the cycle continues…
I cannot say that we are bullish on markets – at least not quite yet. But with the attractive yields on local fixed interest, the better-than-average valuations on local equities, and the extreme levels to which global markets have sold off, it is hard to ignore the opportunities presenting themselves to those investors with the patience to ride this through.

As the legendary investor, Howard Marks, once said, “I am a great believer in the cyclical nature of the markets. But I never cease to be amazed at how far they can go in one direction and for how long; the extremes they can reach, despite all logical arguments to the contrary; and the swiftness of the swing back”.

Portfolios trading in the red are never pleasant but remember the lesson that trying to speed-up the recovery by chasing the next shiny object has repeatedly proven to be the worst thing any investor can do.

Time has revealed that over and over again!