SA has been here before

While the release of yesterday’s news that South Africa is now in a technical recession can be considered as a sombre reflection of the local economy in general, remember that we were in the same situation last year.

A technical recession – as represented by two quarters of negative growth – was called, but the initial gross domestic product (GDP) print was later revised, and the recession disappeared from history.

With releasing the GDP quarterly estimates, there is a trade-off between timeously disseminating the print and accuracy.

Whether or not the calling of a recession is accurate, what is concerning in the quarterly statistics is that household spending is coming under pressure, posting the first decline since the first quarter of 2016. But the truth is that this is something that many South African households can already relate to.

We cannot control the news flow or the accuracy of the news and only time will tell if the South African economy has moved into recession.

The key for investors is to stick to their long-term plan and not panic. It is a simple approach, which has served investors well, but not always an easy one to stick with.

Don’t let the short-term noise drive your decisionmaking. It is important to stick to your longterm plan, which should match the type of assets you are invested in with your time horizon.

Be diversified across different asset classes, locally and offshore, to ensure that your portfolio can deliver returns in multiple different circumstances.

South Africa-focused shares – banks and retailers – are coming under significant pressure following the GDP release, but the rand hedge shares listed on the JSE are green.

SA Government Bonds have sold off with the benchmark R186 off while the rand-dollar has depreciated to R15.20, supporting offshore investments.

Christopher Eddy is senior investment analyst at 10X Investments

It is important to stick to your longterm plan, which should match the type of assets you are invested in