Are we actually out of the woods?

In the clear light of early 2010, we know that the United States and the United Kingdom have emerged from recession, realising along the way that there was not, in fact, a global credit crunch, only a Western credit crunch. Much of the East was just fine, thank you very much. South Africa also has emerged tentatively from recession, but is there an aftershock on its way?

In a client letter to investors in the JSE’s Satrix investment plans, chief executive officer of Satrix Managers (Pty) Ltd Brett Landman writes that on a global level, the credit crunch cut deep for most of last year. Was it the end of capitalism? Was it the end of investing as we know it? These were genuine, much debated questions.

Respected publications such as the "Financial Times", for instance, ran articles and special features on both subjects for months, calling the best minds to state their views and opinions.

A year ago, who would have thought that share markets around the world would rebound so strongly? Who would have thought, this time last year, that the JSE All Share Index would be up more than 50% from its low in March? Who would have thought that R75.42 billion in foreign money would have flowed into local shares on the JSE in 2009?

South Africa has emerged – tentatively – from recession. But now a new question is creeping into the conversation: Is the Western world truly over its credit crisis or is there an aftershock on its way? Are we actually out of the woods? Or is the recent weakness in the markets a sign of things to come?

How does it affect your investments in Satrix?

The global credit crisis has proved the validity of two investment truisms. One, that investing is all about time in the market. As Warren Buffett is fond of saying, “The correct holding period for the market is forever.”

As an investor in the Satrix  Investment Plan, you have proved the wisdom of this approach to yourself. While the world has been all over the place in its opinions, you have been in the market. Your monthly contributions since the market low have proved to be an unprecedented opportunity to buy South Africa’s top shares at bargain-basement prices.

The second investment truism is closely related. It is virtually impossible to time the market. It makes perfect sense to buy when shares are low and sell when they are high. But even the brightest, most informed minds cannot call it. How many sages predicted the rebound?

Take a look in the archives of any well-known money-related website, local or international. How many articles predicting an amazing 40%-plus rise in stock markets are there?

With so much information available to every investor on the planet – particularly online – it is easy for the most inexperienced investor to fall into the trap of thinking that he or she knows enough to venture an opinion. It is easy to feel confident.

But feeling confident and being right – actually knowing what the complex beast of the global economy will do – is another matter altogether. The truth is, we will only know the answer a year from now.

Do not attempt to time the market. The market knows much more than you do. Again, investors in the Satrix Investment Plan have proved the wisdom of this approach. Many of the country’s smartest investment advisers have missed out the massive rise in the JSE over the past months, while a simple monthly debit order has proved to be a successful investment. The results speak for themselves.

All of the Satrix products have shown a remarkable price performance over the past year. The three-year performance figures reflect the impact of the global credit crunch – and one of the most devastating falls in the history of stockmarkets around the world.

The five-year figures – the minimum time one should consider an investment in the market – show healthy returns that outperform inflation comfortably.

All the Satrix portfolios declared dividends for the quarter ended December 2009. Once again, the lower correlations of the performance of the Satrix Rafi and the Satrix Divi relative to the other Satrix exchange-traded funds (ETFs) – which are established over market cap weighted indices – demonstrate the benefit of diversifying your passive investment holdings by including these ETFs in your portfolio.