Defensive stance now required when seeking risk asset returns
Cash-rich, patient investors will reap benefits of quality stocks that get caught up in the panic, writes Kurt Benn
Risk assets have had a tough time over the past three years. Notwithstanding 2017’s recovery, returns generated by risk assets have been fairly benign and have only moderately outpaced domestic inflation. Sluggish global growth, elevated valuations, concerns about the end of quantitative easing and geopolitical tensions are but a few of the reasons put forward for this subpar performance. Domestically, the perceived instability of the Jacob Zuma administration, which included several cabinet reshuffles, the deterioration of the government’s finances, weak economic growth, corruption and the ANC’s internal power struggle, manifested in downgrades, rand weakness, sharply higher inflation and severely depressed investor confidence. Domestic assets sold off aggressively in the first 11 months of 2017. Banks and retailers lagged the all share by 14% and 9% respectively, while the yield on the 10-year government bond (R186) reached 9.5%, placing it among the cheapest assets globally. In D...
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