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Market Update

By November 26, 2021 November 29th, 2021 No Comments

As you may notice today or tonight when you see the evening news, there is a new covid variant that is causing risk assets to fall, that has popped up in Southern Africa. It is apparently very contagious and people who have been vaccinated have been noted as having it. At this juncture no one knows how this will play out, but without a doubt it is going to be negative for risk assets (equities etc). This along with the prospect of interest rates rising and central bank support being removed globally will certainly make the end of 2021 very interesting.

What will the impact be on our portfolios?

Our portfolios will be impacted negatively by the pull back in risk assets but by a much lesser degree than it could have been because we have gradually over the past month, taken risk off the table and slowed each lane down by reducing our exposure to risk assets, especially in OBI 6-9 where we hold cash of more than 30%. If we look today at the main OBI portfolios, then cash levels are as detailed below:-

 

  1. OBI 3    =             24%
  2. OBI 4    =             27%
  3. OBI 5    =             28%
  4. OBI 6    =             33%
  5. OBI 7    =             33%
  6. OBI 8    =             35%
  7. OBI 9    =             40%

 

Each portfolio may be slightly different to this, so please note your actual cash could be slightly less or slightly more.

As we see it as the markets rallied so far so quick, since April 2020, we always felt that risks would increase in Q4 2021 especially if a new variant appeared, which it has. We are therefore positioned to take advantage of this, and we will therefore continue to monitor day by day what is happening. As soon as we feel the “Value at Risk” equation, looking at upside potential and downside risks in conjunction with greater clarity on the economic situation globally, favours reinvestment, of the cash,  we will re-deploy and cyclically rotate back into Risk Assets as Gina mentioned on Wednesday. Remember we are very comfortable in the medium-term outlook, and a setback having had such an amazing investment period was very likely to happen and we are not alone in that thesis.

Therefore, rest easy we got ahead of this, portfolios will still be impacted because all assets are impacted when risk comes off, even non equity, but by nowhere near the extent if we had just done nothing and we have therefore taken an expected risk and turned it into an opportunity. The opportunity is created because we have high levels of cash that we can deploy quickly when assets are viewed to be worth buying again which at this juncture we cannot forecast, noting it is not normally a long time and would expect mid December 2021 to have reallocated unless risk continue to worsen, then we may take further short-term action.

Have a lovely weekend.

VBW

Jason