Reflecting on a Covid year

It is fitting to reflect on the past Covid year of lockdowns, uncertainty, strange restrictions, deserted beaches and trauma. Time has flown by after periods of standing still. A year ago, we lived in total seclusion and you were only allowed to exercise in your garden (Figure 1).

Figure 1: Running in your garden

Source: Strava

If you had socialised with your neighbour, it would only have been in your driveway or over the fence. One could not visit family or friends and provincial and country borders were closed. You had to wash your hands, wear a mask and keep your distance. The President regularly held “family meetings” where he was the only one talking. We learnt of quarantine and that open shoes could spread the virus. All the smokers were resourceful in finding their poison. The fiscus was however receiving no excise duties and had to borrow on a large scale to fund relief packages. Interest rates fell sharply and we had to make provision for extra reserves in case the lockdown went on longer than initially expected.

We know that the impact of Covid remains, with continuing infections and deaths. The economic impact was and still is severe. There is now a third wave in Europe. Many businesses are struggling to survive, specifically in tourism and hospitality sectors and anything related. Airlines are under immense pressure with international travel heavily curtailed. Sport is practised in empty stadiums and mass gatherings for religious or entertainment purposes are restricted to limited audiences.

On the other hand, we have learnt to work differently and Zoom or MS Teams has become the word for online meetings and one wonders when office workers will ever fully return to offices. Technology has made it easier to keep contact although it is small consolation when thinking of the advantages of person-to-person encounters.

We have been speaking of a “reset”. When we look back at the past year everybody in a way will think of something in respect of which you could have pushed the “reset” button. In my mind it was something which you could not continue doing due to Covid, but which still had a place in your life. By approaching it differently or laying a new foundation by “resetting” you may have arrived at a better, healthier, safer place.

Meanwhile we are waiting for vaccinations…

There were also surprises and I would like to point out three: 

Firstly, that bottle of wine which you had forgotten in a shelf had matured very nicely. 

But more seriously, the performance of the rand was a big surprise. Since the low in April 2020 the rand strengthened by 20% and then the JSE All Share also surprised with a 67% recovery since the low in March (Graph 1).

Graph1: Rand/VSA $ currency and the JSE All Share Index

Source: Iress

Global bourses (e.g. the S&P 500) also performed well but from a South African investors viewpoint the recovery was not as great due to the strong rand which reduced some of the offshore “profits” (Graph 2). 

Graph2: S&P 500 in $ terms and in rand terms (based to 100)

Source: Iress

From the middle of March 2020, the S&P 500 has risen 68% but for a South African the rise was 48%. 

Diversification remains our strategy as it helps investors to receive returns from various sources or asset classes, locally and internationally. To think you can jump from one asset class to another and think you can get the timing right is almost impossible. The solution is diversification where you have a good chance to continually be on the winning side from some part of your portfolio.

PRETORIA EAST | Lynnwood Bridge Office Park, Kaaimans Building, 4th Floor, Lynnwood Manor | Postnet Suite 96, Private Bag X025, Lynnwood Rige 0040 Tel: 0861 774 000 | Fax: 012 349 5300 | pretoriaoos@psg.co.za 

The opinions expressed in this document are the opinions of the writer and not necessarily those of PSG and do not constitute advice. Although the utmost care has been taken in the research and preparation of this document, no responsibility can be taken for actions taken on information in this newsletter.
PSG Wealth Financial Planning (Pty) Ltd is an authorised financial services provider. FSP 728.