August was a funny kind of quiet month, given the drama of local politics, the mysteries of what Donald Trump will do next, North Korea’s nuclear provocation, and the unending tragicomedy of Brexit. Despite it all, markets drifted upwards seemingly without a care in the world.
Much talk in the likes of London’s Financial Times has centred on the lack of volatility in global markets. It appears that the unending supply of “free” money supplied by first-world central banks, under the guise of quantitative easing, continues to flow into “risk” assets. There is, as yet, no signal from them that this policy of supporting investment markets will stop.
As a result, international markets in general had a steady August. The standout performer was Hong Kong’s Hang Seng index, which was up 2.3% and is by far the best international performer this year with a return of over 27%. In rand terms, the S&P500 in the US has offered little more than break-even returns.
Given the level of political uncertainty, July was remarkably stable in terms of overall market conditions. The JSE was helped to a large extent by improving sentiment in the greater MSCI Emerging Markets index, especially China, which made equities the top performing asset class for the month (up 7%). By contrast, property returned 3.6% in July and bonds 1.5%.
In my previous blogs titled "What I wish I knew at age 25: Understanding investment risk" and "How much money are you prepared to lose" I said every investor, including me, has to know their own appetite for risk before they can even think about targeting the returns they’d like to get. Basically, how much money are you prepared to lose in the short term in order to reach your long-term goal?
Last time, I told you how Riskalyze is specifically designed to match how much you are prepared to lose money (risk) in the short term against your long-term goals (returns). I’ll go into that a bit more later, but first let me tell how badly the investment industry has let down ordinary investors.