When we think back to 2020, one thing that will always stand out is COVID-19 and the way this virus changed our worlds forever. It is no wonder that Collins Dictionary has declared “Lockdown” as the word of the year for 2020 after a sharp rise in its usage during the pandemic. Unfortunately, we will continue to use this word into 2021.
When President Ramaphosa first declared lockdown in South Africa in March, we all readily took to the novelty of working from home, using sanitizers and wearing masks. Technology predominated as we embraced “new” ways of ensuring we continued with our day-to-day lives. It was exciting to Zoom or Teams (among various other platforms) with our colleagues and clients to ensure we stay safe. Some industries were fortunate to continue as per “normal” – even if some of the digital novelties have worn off – but, in general, the devastation created by lockdowns across many economies will be with us for a very long time. As we are experiencing first hand, the world is facing a second wave of the pandemic and, in some countries, there is even talk of a third wave. We are all hoping that the various vaccines will stop this virus in its tracks in 2021 and that South Africa will get its fair share as soon as possible.
Looking back at the year that was, it has been one of extreme volatility across all asset classes. There have been some clear winners, with the aforementioned pervasive use of technology boosting the tech companies, with the FANGs racing ahead. Gold was boosted by QE infinity and fears of a dollar debasement, but the global reopening triggered a partial rotation out of defensive assets into growth assets, such as oil. Our local equity market experienced some of the fastest and largest drawdowns in history, followed by some of the sharpest V-shaped recoveries. South Africa has come out of the pandemic with substantially higher sovereign debt costs amid a surge in borrowing due to the COVID-19 stimulus package and cratering in tax revenues. Yet debt-service costs for consumers have fallen sharply as the South African Reserve Bank slashed the repo and prime rates to 50-year lows. Who would have thought that the rand would be trading with a 14-handle in the face of a severe domestic recession and potential fiscal crisis. One thing we have learnt is never say “never”. Heading into 2021, investors will face a hunt for yield that can only be found from allocating to the right asset classes at the right times. In a low-rate environment, alternative asset classes will have to be considered to create return-enhancing diversified portfolios.
We wish you all the best for the remainder of the year and hope you have a well-deserved break over the festive season.
- Level 2 B-BBEE contributor
- Matrix NCIS Fixed Income Retail Hedge Fund 1Y return of 34.4% till end November.
- Matrix NCIS Equity Fund ranks number 9 out of 117 funds in the General Equity space since inception.
- Amplify SCI Defensive Balanced Fund ranks number 1 out of 81 funds in the Multi Asset Low Equity space since inception.
- Matrix NCIS Fixed Income Retail Hedge Fund has returned Cash+10.4% since inception.
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