I wanted to use the term “Dead Cat Bounce” but perhaps the cat wasn’t dead in the first place. We all know that equities is a volatile asset class and this was again proven by the moves seen over the last six months.
Looking at the performance of the S&P 500 we see the following:
- After rising by 8.72% since the start of 2018, the S&P peaked on 20 September;
- From 21 September the S&P 500 fell by 20% to reach the worst levels for 2018 on 24 December 2018 – a technical bear market;
- Yet the bear market proved to be short-lived with a spectacular turn-around as the index rose by 19% to 1 March 2019;
- A 20% down move followed by 20% up still leaves you with a point to point return of -4.3%.
We have all been taught that in the long term equities will deliver the best real return. So if you have a long-term investment horizon you should be fine investing only or largely in equities. However, what the numbers above show us is that entry points are also very important.
The question now is will this rebound last? The world economy is turning with growth in developed markets entering the late stage of the business cycle. Central banks have shifted towards less restrictive or outright accommodative stances: the Fed’s dovish pivot and the ECB’s renewed stimulus. Worldwide stock markets need stimulus to maintain momentum, but what will happen if there is no support left?
Locally our equity market moves were a bit less dramatic with different timing, but big swings still made asset allocation more difficult. At least inflation moderated again, with the latest print in headline inflation of 4% y/y being well within the band targeted by the SARB. Nersa did not provide Eskom with a much-feared double digit tariff hike last week (9.4% in 2019), but Eskom needs a higher tariff to avoid losses so be careful what you wish for. The rand has been its volatile self, weakening by 9% in the last month as the local concerns resurfaced: Eskom blackouts; rating downgrades; electioneering….Do not expect this volatility to subside any time soon.
What one needs in these times is a stable, consistent investment process to not be caught out by the headline market moves and to know when one is facing a bull or a bear rather than to play cat-and-mouse with the market.
Headline Information of the Matrix Funds
LONG FUNDS: (Inception date 1 June 2014)
- Matrix NCIS Equity Fund has SWIX TR as a benchmark and continues to do well against peers as well as the benchmark index. The fund ranks number 4 if one compares it against all funds in the General Equity space (123 funds) since inception with annualised performance of 7.5% achieving Swix +2% over this period.
- Sanlam Select Defensive Balanced Fund achieved a return of CPI+3.3 since inception exceeding investment objectives (CPI+3%). The fund is ranked number 2 out of 91 funds since its inception with annualised performance of 8.1%.
- Sanlam Select Bond Plus Fund has outperformed the ALBI since inception by 0.3% per annum. The fund is ranked number 7 out of a universe of 27 funds over the same period with annualised performance of 8.5% since inception.
- Sanlam Select Absolute Fund has a very short track record under management of Matrix Fund Managers. We took over the management of this fund in October 2017. The supplemental deed of the fund is being changed to the Medium Equity category. Comparing the short track record against peers shows a promising start. If you were to look in Morningstar, for example, the fund has a longer track record but we are only responsible for the last 16 months.
HEDGE FUNDS:
- Matrix NCIS Fixed Income Retail Hedge Fund has returned 15.7% since inception. The fund achieved annualised returns of performance of 11% over the last 3 years outperforming Equities with no correlation.
- Matrix NCIS Multi Strategy Retail Hedge Fund has returned 11.8% since inception. Over time the fund has no correlation to the equity market, low correlation to bonds, and performs well against both asset classes since inception.
If you would like further information please feel free to contact us.
