Post-Downgrade, The Outlook For Return Isn't So Gloomy

Prudential’s Michael Moyle discusses where the investment manager sees value after SA’s credit rating was downgraded.

- Michael Moyle

Although heightened uncertainty has dominated local financial markets in the weeks since the Cabinet reshuffle and sovereign credit ratings downgrade, Prudential’s view on potential investor returns over the medium term subsequent to these events has been less gloomy than one might imagine. The weakness seen in South African nominal bonds and listed property as well as financial and retail shares has presented good opportunities for investors to buy up attractive assets at discounted valuations. This should produce above-average returns over the medium term.

In positioning our multi-asset portfolios in the “post-downgrade” environment, as valuation based investors, it’s important to note that we have not changed our approach: we continue to place great importance in building well-diversified portfolios of attractively valued assets with the appropriate risk. These characteristics provide some level of inherent protection against future market shocks.