With every passing day, more and more reports are published about the economic impact of strategies implemented by governments everywhere to slow down Covid-19 infections and deaths. In many countries, South Africa included, protest action against lockdown rules is intensifying. Amidst all this, stock markets, bond yields and currencies continue to fluctuate and economic decision makers are implementing fiscal and monetary policy changes – including lowering of interest rates and stimulus packages – to support ailing economies.

The events of recent months have been described as ‘unprecedented’ and market commentators referred to them as two black swan events (Covid-19 and dramatic fall of oil price) that no-one had foreseen. The next wave of com-mentary now suggest that the world will be changed forever. The New York Times reported on 17 April 2020 that “when big convulsive economic events happen, the implications tend to take years to play out, and spiral in unpredictable directions. Former US Secretary of State, Henry Kissinger, wrote on 3 April 2020 “the reality is the world will never be the same after the coronavirus. To argue now about the past only makes it harder to do what has to be done”.

All this has made investors – even those who have been investing for decades and have seen and survived previous market upheavals – nervous and many are uncertain. So, how to proceed?

Five Certified Financial Planner® professionals at Brenthurst Wealth respond.


Events such as these are impossible to forecast.
Recent developments have the potential to grip us
with fear, both in our personal lives and in our
financial decisions. It is however a time to remain
calm, find strength and seek the skills and
wisdom in the right places.

Understanding asset allocation, risk and
time horizons are crucial to navigating
sound financial decisions in uncertain times.
If you do not possess these skills yourself,
employ the services of a professional.

The risk of losing capital is not necessarily market
volatility, but how we as investors re-act towards
market volatility.


Do not act on impulse.
Employ the services of a qualified, experienced
advisor who will analyse the investor’s assets
and liabilities, income, risk profile and current
asset allocation to recommend possible
changes, if required, and do so gradually.
Care should be taken to not realise losses as a result in
asset values declining.


No use taking an “ostrich-with his head in the sand”
approach, now more than ever investors need to
know exactly what is going on in their financial
affairs. It is, however, very dangerous to make
changes to investments based on the current newspaper
headlines, which most likely will result in
emotion driven decisions.

The biggest risk investors are facing is not
markets volatility but how they re-act to
market news. Investors who have balanced,
diversified portfolios should stay invested.


The biggest (money) element post-lockdown life to
act on will be the importance and benefit of saving
for the proverbial rainy day (that rainy day is HERE,
and another will come in the future).

The lockdown is the perfect time to review
every single aspect of personal and household
financial circumstances. Budgets,
investments, insurance, life policies, etc.

Review what is earned, what taxes are payable, what
current savings status is, regular expenses like mortgage
payments, utility bills, car payments. The process
must include a review of investment portfolios
and to assess whether the asset allocation matches
up to the risk profile. Now is not the time to invest
aggressively, simply based on the volatility that local
and offshore markets are experiencing.


My advice at this stage is to not make any major
changes within investment portfolios. Values may be
down, but a loss is only a loss when you sell out at the
wrong time. Instead I suggest re-looking at the bigger
financial plan and take this opportunity to align different
areas of a plan to being more “financially smart”.

Many people are suddenly faced with the reality of not
being able to earn an income during these uncertain
times – especially lockdown.

The importance of an emergency fund has
never been more pressing. One should assess
the way you spend your money as well as
what accessible savings you have. Ensuring an emergency
savings fund is adequate and in existence is vital.

A sound financial strategy should include multiple financial planning disciplines and not focus on investing and tax returns in isolation.


There are some quality listed companies on the
JSE ALSI, but there is no simple answer to the

Valuations are not the only consideration.
An assessment of asset and sector allocation,
global geographical spread and
currency fluctuations should all be considered
before making any decision to sell or buy, locally
or internationally.

Certain markets, sectors and asset classes may
continue to struggle for multiple reasons while
others offer potential growth opportunities and
attractive yields at lower levels of risk. The JSE
ALSI has shrunk considerably and is a tiny market
with just over 600 listed companies to choose
from. Other international markets offer compelling
opportunities not available in SA and provides
diversification, but needs to be weighed up against
investment objectives, risk, income requirements
and time horizons.


This matter will have to be considered on a case by
case scenario as each individual’s situation is unique,
but yes if the investor only has exposure to SA Equities
in his portfolio and no other asset classes then
it would make sense to diversify some of the SA
equities to other asset classes like Offshore Markets,
local Cash & local Bonds. The problem this investor
is facing is that he is not invested in a diversified
portfolio, and he needs to diversify his funds.

By bringing in some offshore exposure
he will give his portfolio alternative
opportunities for growth.

The fact of the matter is that the SA economy still
only makes up 1% or less of global GDP and the SA
Market is likely to take very long to recover from the
pain inflicted by COVID-19 on an already struggling
economy. In saying that, there will however always
be opportunities in any Equity market, therefore if
you have cash sitting on the side, and you are willing
to stomach more volatility you can explore investing
in a combination of Local and Offshore Equities. Not
all stocks/asset classes are the same and you must
do your homework before you invest.


Not all SA assets are bad, just like not all offshore
assets are good. However, I do not think a meaningful
recovery is likely in the medium term.

Simply put, investors have made more
money in rand terms with having offshore
assets [see table].

There is always perceived value in the local market,
but most investors do not have the time or expertise
to comb through every single share on the JSE and
understand the company structure, the dynamics of
the industry in which it operates etc., to make a buy/
sell decision. The SA economy is shrinking; it is
unfortunate that it got hit with a double whammy at
the same time (lockdown and downgrade).

The important question to ask pundits who claim
the market (or any other market for that reason) is at
opportunistic valuations, is why? If someone is recommending
buying an asset (equity, property, cars, etc.)
always ask why? Also ask yourself does that person
benefit from my decision. I personally do not see any
growth in any SA market for 2020. And there is also
the struggling currency to consider – the rand is 35%
lower for the year to 21 April 2020 compared to the
previous year.


The JSE now offers local investors opportunities to invest
in quality companies not seen for many years. However,
while a JSE price-earnings (P/E) multiple looks
attractive at 14,28 compared to the US S&P 500 at 18,92,
the macroeconomic environment within which South
African companies operate is impeded by government
policy that is urgently in need of structural reform,
inflexible labour policies and massive unemployment,
which inhibits GDP growth. Global recovery will benefit
companies operating in business-friendly environments
in developed markets a lot earlier than in the developing

South Africa is also not able to introduce the
same stimulus into the local economy which
developed economies are able to.

Investors may want to consider exiting out of the JSE
at depressed values (lower CGT) to gain offshore exposure
at this time. The rand is unfortunately very weak
currently, but currency considerations should not be
all important when diversifying across geographies
and currencies. Where income is required, the local
market offers attractive bond yields at CPI plus 6%,
which cannot be found offshore. Important when
living expenses have to be paid in ZAR.


Each investor’s case is different and should be reviewed
individually, on its own merits and background suited
to the needs, investment term and risk profile of the

Investors who have been following a well-diversified
strategy for the last couple of years with reduced
exposure to local assets are likely not to benefit from
any changes at this time. For some it may be the right
time to sell and move into other asset classes, but I
expect investors with well diversified portfolios will
not need any changes. However, investors with a very
high allocation to SA stocks (60%) have to cope with
valuations well below the initial investment. Given the
poor outlook for the local economy and thus the JSE, it
may very well be in the investor’s interest to reduce
this allocation, even though they might realise losses.

Rather invest in other asset classes with a
better outlook for future growth.

Where it is “impossible” to reduce this allocation for
whatever reason, investors must accept that recovery
is likely to be very slow and not significant for a long