April Newsletter

· · · · · · · · · · · · | Salvo Investment Views

Monthly Market & Fund Update

Markets bounced back sharply during April on the back of positive news. Many countries started to relax lockdown restrictions and positive signs from China’s economy restored some hope that the impact from COVID 19 will be shorter lived than initially expected.

April saw the 5th best month for the MSCI World Index since 1960 with global equities returning 10.98%.
Equity markets are forward looking and many companies have given profit guidance of a underperforming 2nd quarter followed by an anticipated recovery in demand for goods & services.

Salvo took advantage of buying into the market at 34% below it’s highs as we took a forward view from those valuation levels towards the end of March. We have subsequently started reducing equity exposure as markets bounced back sharply.

April Newsletter

Local Economic Update

  • South African equity markets bounced back with 13.77% in April . Equities are still 24% below their highs.
  • The Rand weakened further during April by 2.39% against the US Dollar.
  • The reserve bank estimates that South African GDP will contract by 6.1% due to the lockdown of the economy and the effects of COVID-19.
  • SA Bonds also officially exited the WGBI index but regardless of this bonds recovered 3.72% in April.
  • Interest rates were cut 100bps during April. The current yield on cash is 4.50% per year

Global Economic Update

  • Global equity markets recovered some value in April, bouncing back 10.82%. The reasons for this was the gradual easing of the lockdowns around the world and optimism of a vaccine by year end
  • The US has seen layoffs in excess of 20.2m workers. This number is expected to rise during May as companies will look to cut costs.
  • The US Dollar continued to strengthen against many currencies.
  • Many credit and property markets also recovered but are still off of their highs prior to COVID-19.

Conclusion

We believe that until there is more certainty regarding a global vaccine, markets will continue to be tremendously volatile which may offer short-term opportunities. Even though there may be tactical shifts in asset allocation over the short term, our main priorities are to mange risk effectively on behalf of client’s & focus on the long-term investment opportunities present in markets.