| Good morning Voornaam, And so the chaos continued on Friday, with Asian markets now adding to the bloodbath this morning. Typically, a market crash sees a drop of around 30% - 35%. This time might be different, as the valuation base off which markets are falling was ridiculously high vs. historical averages. The bigger they are, the harder they fall, right?
Well, maybe. Time will tell.
The S&P 500 is now 17.5% off its 52-week high. We could have a long way to go. As mentioned last week, I'm still doing absolutely nothing. The stocks I own are firmly in the long-term bucket, unless the underlying operations suffer a significant negative change in the business, not just in the share price. Sure, the tariffs in current form would certainly meet that definition, but I can't see them sticking.
I also like to keep a really healthy cash balance in notice deposits of varying lengths, as South African interest rates give you a real return (i.e. ahead of inflation) for staying in cash. Once the market panic has settled into a lull, I'll be able to buy more of my favourite stocks at a much more palatable valuation.
As I discussed in a podcast with Duma Mxenge of Satrix in January, I'm also specifically working towards buying a family home in the next couple of years. Although the planned suburb has changed since the podcast, the principles all remain the same. Will Trump's approach to tariffs and the related economic fallout finally pop the Western Cape property bubble? It's entirely possible, which is another good reason why I'm keeping a healthy reserve in cash right now while happily renting my property.
All of this talks directly to the strategic asset allocation that I follow with my own money. Concepts like diversification come through clearly here, as I made a very clear choice to keep a significant portion of my wealth in interest-bearing deposits. This brings us neatly to the concepts of diversification vs. diworsification and how balanced funds can be helpful in this regard. If you want to understand more about these concepts (along with why strategic asset allocation beats stock picking), the latest Ghost Stories podcast with Kingsley Williams of Satrix is a fantastic choice this morning. Find it here>>>
Onwards to company news. On Friday, we saw the impact of disruptive forces in the local updates, with CMH and Purple Group both releasing important numbers. CMH is firmly on the wrong side of the Chinese car trend, as is clearly visible in the latest earnings guidance. Over at Purple, they are on the J-curve and enjoying a substantial upswing in profits.
In fact, after many debates in the past few years, I have a long-standing friendly agreement with the Purple management team that I'll let them know when I think the valuation has finally come down to earth. I've gotta tell you - I'm the closest I've ever been to a long position in Purple. It's solidly on my watchlist.
These details and the Nibbles are available in Ghost Bites at this link>>>
For those who love a deeper dive into companies, the latest Unlock the Stock featured Fortress Real Estate Investments. Life-after-REIT looks just fine there, thank you very much. Watch the recording of the management presentation and vibrant Q&A at this link>>>
CA&S (you might recall seeing their recent results here) is the next company joining us on Unlock the Stock. As always, attendance is free! Register for the event on 10th April at this link>>>
Finally, have you ever wondered why certain things go viral and others don't? Dominique Olivier explored this concept in her latest article, using the brilliant Adolescence on Netflix as an example. Enjoy it here>>>
Keep your head down today - it's going to be a wild ride for your stocks. |
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| GHOST STORIES: Diversification - the way to survive market chaos |
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| | | With the markets in disarray in the aftermath of tariffs, it looks like the theme this year is more around risk management in a bear market rather than which growth stocks to buy.
This is where strategic asset allocation becomes key, as discussed with Kingsley Williams of Satrix in this podcast.
Enjoy it here>>> |
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| GHOST STORIES: VAT strategies, bracket creep and what it means for South Africans |
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| | | With the dust having settled on the Budget Speech and the proposals that parliament will need to vote on, Tertius Troost of Forvis Mazars in South Africa joined me to reflect on the key drivers behind the headlines.
VAT has been the focus area, but is it true that a VAT increase is anti-poor? And is it correct to rebut the “South Africa has a small taxpayer base” argument by pointing out that everyone pays VAT? What is bracket creep and how does it affect middle-class South Africans?
These questions and more are answered in this podcast>>> |
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| GHOST WRAP: Q1 winners on the JSE |
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| In considering how the first few months of the year have played out, some surprising winners have emerged. The performance in gold is simply a case of the sector carrying on where it left off in 2024, but what about platinum? And where did that telecoms rally come from? Also, have retail stocks continued their slide since the previous episode of Ghost Wrap that focused on that issue?
You can find the recording and the transcript (with charts) at this link>>> |
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| GHOST BITES - Making sense of SENS on the local market |
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| | | CMH is firmly on the wrong end of Chinese car disruption. Purple Group is on the right end of disruption in financial services, with solid growth that shows they are on the J-curve. Get the details in Ghost Bites>>> |
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| Unlock the Stock - Fortress Real Estate Investments |
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| In the 50th edition of Unlock the Stock, Fortress Real Estate Investments made its debut on the platform to talk about the recent performance and strategic focus areas for the group. The recording of the management presentation and interactive Q&A is available at this link>>> |
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| DOMINIQUE OLIVIER - Hot takes: chillies and the human desire for suffering |
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| | | There’s a temptation to treat virality like a shot in the dark. But virality isn’t an accident - it’s chemistry. And when it works, it works for a reason: a potent mix of psychology, social contagion, and cultural timing. Dominique Olivier uses Adolescence as a perfect example in this piece>>> |
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| INVESTEC PODCAST: Global economy - recession or recovery? |
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| | | Recession risks, inflation pressures, and trade tensions - how is the global economy shaping up in 2025? Investec’s Chief Economists, Phil Shaw (UK) and Annabel Bishop (SA), take stock of the latest trends in No Ordinary Wednesday. From global growth forecasts to the economic outlook for Europe and South Africa, they break down what lies ahead in this podcast>>> |
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| International Business Snippet: |
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| Against a backdrop of absolute chaos, the US will see major banks release results this week. There will also be some important retail and FMCG announcements, so tariffs will feature strongly in those earnings transcripts as well.
When the headlines focus on things like how asset managers are now making exceptions to hold defense stocks vs. taking an ethical stand and not investing in this sector, you know that the markets are in trouble.
Our latest research in Magic Markets Premium is on Chinese giant Alibaba. With Jack Ma back in the spotlight and the share price having rallied strongly before tariffs, is there reason to believe in this story again? For our subscribers, we dig into how Alibaba is making money and whether we would jump in. |
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| Magic Markets: Consumer Conundrum |
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| | | Magic Markets: The first quarter of the year was an unhappy one for most consumer stocks. Tariffs are top of mind, as is the pressure that many brands have been facing in China. Inflation is a risk and consumer sentiment is weak. Against this backdrop, is there opportunity in this sector, or is it better to sit this one out and let the volatility do its thing?
And does it make a difference to look at discretionary vs. defensive stocks? To learn more, listen to this podcast>>> |
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| Macroeconomic indicators and IG Markets macro update |
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| Global financial markets experienced significant downward pressure as escalating trade tensions between the United States and China triggered widespread selling.
The Dow Jones Industrial Average futures plummeted over 4%, with S&P 500 futures declining 4.1% and Nasdaq 100 futures also posting substantial losses. Early trading suggests these declines may extend further, despite some stabilisation in futures markets.
Asian markets were hit particularly hard, with Hong Kong and Chinese stocks diving on Monday amid growing fears that the widening global trade conflict could trigger a deep recession. China has responded to the United States' tariffs of over 50% by imposing additional levies on American imports.
The JSE All-Share Index is expected to open significantly lower once again following its international peers in the risk off trade environment.
Currency markets reflected the growing uncertainty, with investors abandoning the dollar in favour of traditional safe havens like the Japanese yen and Swiss franc. Notably, the dollar's typical safe-haven status appears to be weakening as concerns mount over the tariffs' impact on US economic growth.
The rand is trading at significantly depreciated levels, finding impetus for weakening from risk-off trade, lower export commodity prices and continued domestic political uncertainty.
Gold prices fell to a three-week low as part of the broader market sell-off, with investors liquidating gold positions to cover losses in other investments. Despite this temporary decline, gold remains a safe-haven asset that could stabilize if economic conditions continue to deteriorate.
Oil markets also faced significant pressure, with Brent crude falling to a four-year low of $63.21 per barrel and WTI dropping to $59.79. This decline reflects both increased OPEC+ production and concerns about reduced global demand due to trade tensions, compounded by Saudi Arabia's decision to reduce crude prices
Key Indicators: USD/ZAR R19.31/$ | US 10yr 3.90% | Gold $3,029/oz | Platinum $914/oz | Brent Crude $63.29
As often as practically possible, insights from the IG Markets morning macro update by Shaun Murison will be featured here. Where this isn't possible, only indicators will be provided. If you want to learn more about trading, refer back to The Trader's Handbook, a podcast series that takes you through many of the important principles in trading. |
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