In case of a pull­back

RISKSA Magazine - - Medical -

Vor­w­erg says they are bal­anc­ing their funds for a gen­tly ris­ing mar­ket and have put in place pro­tec­tive mech­a­nisms to buf­fer a pos­si­ble pull­back that in­clude buy­ing ac­tual pro­tec­tion op­tions on the JSE, in­vest­ing in stocks that would be de­fen­sive in a down­turn, and re­duc­ing over­all eq­uity ex­po­sure to stocks. “We’ve done all three,” he says. Look­ing ahead, Vor­w­erg says the econ­omy will likely trudge along and ex­ac­er­bate the lack in in­vestor con­fi­dence. The ques­tion is when the global cen­tral banks start tight­en­ing their loose mon­e­tary pol­icy and hike rates. The JSE is vul­ner­a­ble to rate hikes as many for­eign in­vestors may take their money back to the big cen­tres and money would flow out of the JSE mar­ket. “It’s some­thing we’re watch­ing but it seems to be way off and it all de­pends on how well it’s man­aged by cen­tral bankers,” he says. “But it’s def­i­nitely a key risk over the next year.” Hart says you have to stick with eq­ui­ties at this stage, even though the risk with eq­ui­ties is ris­ing, it’s rel­a­tive, he says. “Be care­ful to look at your value. The value that hasn’t worked in the last four years will start to work again at some stage, and I sus­pect that may be when we start to see a cor­rec­tion in the mar­kets,” says Hart. “The val­u­a­tion will then start to pro­vide some pro­tec­tion against the down­turn.” He says re­gard­ing the big­ger pic­ture, the eco­nomic slump is ac­tu­ally hav­ing some im­pact on JSE per­for­mance. “Earn­ings are def­i­nitely lag­ging the over­all mar­ket, and at some stage fun­da­men­tals will be rein­tro­duced and that won’t nec­es­sar­ily be pretty,” he says. “To com­pen­sate, the econ­omy ei­ther has to catch up with a growth spurt or mar­kets must have a de­cent cor­rec­tion.”

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