Avoid panic selling — Citadel
• Intrinsic value of assets is unlikely to change overnight
Asset manager Citadel says fund investors should avoid panic selling as the effects of the coronavirus continue to batter markets, sparking concerns of a looming global recession. Andrew Moller, CEO and director at Citadel, said investors should build portfolios for seasonality in the markets, stick to their investment plans and avoid reacting in panic mode.
Asset manager Citadel says fund investors should avoid panic selling as the effects of the coronavirus continue to batter markets.
Andrew Moller, CEO and director at Citadel, said investors should build portfolios for seasonality in the markets, stick to their investment plans and avoid reacting in panic mode.
“Market volatility is something that is going to become more and more part of an investor’s life. Investors need to start building in seasonality into their portfolios,” Moller said.
ALL SHARE INDEX
Global markets have shaved off more than 30% of their value since the coronavirus surfaced, while bonds teetered towards zero and beyond and SA bonds saw a sharp sell-off.
The all share index has fallen about 10.65%% since the start of 2020, while the S&P has lost 9.59% of its value. The index tracking volatility has surged beyond 80%.
“Investors need to understand that this is not the financial markets’ first rodeo, this too will pass. However, the worst thing you can do is become a forced seller,” he said.
He said there would be a shift from left-brain financial planning, which is a more logical approach, to right-brain financial planning, often intuitive.
Investors should not be compelled to immediately abandon their assets that have depreciated as a result of the market volatility, he said.
RESEARCH
“The intrinsic value of those companies or assets that you held, that you had done research on and decided to put in your portfolio are unlikely to change overnight,” said Moller.
According to Citadel’s website, the 27-year-old financial house has R60bn assets under management.
Moller said while we are not headed towards a depression, the market recovery will be strongly linked to a vaccine for the virus. He added that SA would remain in recession in 2020, even as it begins to slowly open up economic activity after a strict lockdown that lasted more than a month.
Moller said a global recession was unavoidable and he expects
SA’s economy to contract by up to 4% in 2020 and a further 2% drop, depending on how slowly the economy opens up.
The SA Reserve Bank has intervened in the fight against the pandemic, slashing interest rates by 200 basis points so far in 2020. It also adds liquidity to the market through the purchase of government securities.
Moller said there were some concerns that markets were being artificially held by the Bank’s interventions.
“That is certainly one of the concerns starting to come out, that the Reserve Bank is not playing the role that it should be playing boldly in terms of printing money.
“We do have a concern around the Bank’s intervention of the bond market.”
WHILE WE ARE NOT HEADED TOWARDS A DEPRESSION, THE MARKET RECOVERY WILL BE STRONGLY LINKED TO A VACCINE FOR THE VIRUS