A few issues come to mind as we negotiate our way out of a bleak and rather stressful couple of months. The extremely cold snap is being replaced by weather only Johannesburg can dish up. The incomprehensible behaviour of some of our politicians, desperate to stay out of jail, stirring up somewhat vulnerable people into creating a smokescreen for their very serious own agendas. This lent South Africa the opportunity to display what only SA can deliver. A response where all levels of society, all racial groups, all language and cultural groups bent their backs to protect and fix. Taxi organisations and organised labour stood to the defence of other people’s property, realising the interdependence on each other.

We have our Olympians doing their thing for a country at the southern tip of Gondwanaland. Seeing the team SA celebration of our newest young super swimmer left me drying my eyes! I am rather happy that she could take her team "vellies" off before entering the pool. If you haven’t seen it yet, click here.

We also must note that, through the recent unrest, our currency suffered very little weakness. Our stock market, likewise, continues to test new highs.

Turning to markets and global dynamics, a few obvious and a few less obvious points warrant noting. The world always changes. Recent events have probably just turbo-charged some of these. I, for one, have with the tireless support of my assistant, wife and sons, taken tech seriously: from buying goods online to finessing some rather sophisticated investments locally and abroad; conducting client-facing, institutional, board and committee meetings; to engaging in family chats with our grandchildren abroad and all perfectly capable of being conducted from the comfort of my patio.
  

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Our stock market, likewise, continues to test new highs.

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Questions are being asked of us as to what will change for good. I think several things have and will continue to change. People are paying greater attention to their health. This is good and is to be applauded. People are also questioning their purpose, quality of life and work/life balance. Over the last few decades, much has been achieved in extending life expectancy. Recent developments, notably Covid, have impacted this, making people worry that this will be with us for a long time or perhaps forever! Not much is "forever" and as time passes, the horrible and far-reaching impact of Covid will pass. It has also been opined that the Warren Buffett approach to investments is also becoming a dinosaur. Granted, the "Sage of Omaha" has largely missed the tech story and accordingly left loads of money on the table, but Berkshire has got lots right over time!

It seems logical that many well-established industries, such as retail, entertainment, learning and travel, to name a few, will require radical change to remain relevant. Much has been said about "WFH" (work from home for those not in the know). This is a major transition impacting development, existing properties and leases, service providers, public transport, cafes and restaurants that tenants patronise and city councils who rely on the rates and taxes to meet their budgets and so on.

This will impact the prices and popularity of homes and flats, previously most expensive close to where people worked. Most folk would live further out and suffer long commutes at least five days a week. This might change permanently, or in most cases, a few days a week, ultimately impacting supply and demand with the obvious effect on value.

Further considerations are the big changers and shapers in the next decade or three. It is essential to ensure, where appropriate, that these are factored into portfolios where investors seek diverse, growth-focused returns. Together with our asset management and stockbroking teams, we remain attentive to these significant trends and will continue seeking out opportunities both locally and abroad.

Finally, interest rates, inflation and the next period. While the US Fed defends current price increases and the fear of inflation being more than a flash in the pan, I am of the opinion that it is more serious than that. Realising that the flow of money into the system is likely to be sustained as a consequence of policymakers’ dovish response and that the US is yet to put its big cashflow into the system, leads me to believe that we will see a change to a more hawkish message in time. The later this happens, the steeper the curve. If yields firm enough, investors will have fixed rates as an alternative to shares and risky assets. This is when watching from the sidelines is recommended.
 

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Markets and, more importantly, humans follow patterns. It’s not ‘different this time’.

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We, at NFB, favour long-term, steady commitment to growth investments. There is also room for what I like to term a "tree and fruit" approach, where you leave the capital deployed but consider switching some profit to less aggressive investments, in a way, banking the gain. Whenever this is done, we recommend carefully considering the tax issues and ensuring the overall portfolio strategy is maintained. We also watch for signs of so-called bubbles developing. Look no further than the US in 2006-8. It is incredible how history has a habit of repeating itself! Housing prices, DIY costs and the value of people’s portfolios, further fuelled by loads of cash in bank accounts not spent during lockdowns, and the feel-good impact of vaccination rollouts are taking us closer to another similar event. Markets and, more importantly, humans follow patterns. It’s not "different this time".

Vigilance, appropriate diversification and adjusting portfolios, particularly where gains have been material and losses aren’t affordable, are recommended. If you are seeking advice or a sounding board to discuss these issues, it is both NFB and our advisory team’s duty and privilege to assist. Please reach out if in need.

Stay warm and safe, and thank you all for your custom and referrals to NFB.
 

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This View from the Chair featured in the Aug / Sept 2021 edition of the Proficio, NFB's bi-monthly financial update newsletter. Download the complete newsletter here.