Preparing For 2019's Expected Volatility

Although investors shouldn’t expect high returns in 2019, there is no need for utter doom and gloom. There are pockets of value to be found as we brace for a bumpy ride.

- Maarten Mittner

It certainly does not make for pretty reading. Stalwarts like Tiger Brands, British American Tobacco (BAT), Aspen, Mediclinic and NEPI Rockcastle are down more than 40% in 2018. MTN lost 36%, Richemont and Naspers* 20% respectively. Growth point, Remgro and Vodacom are all down 14% and Redefine lost 10%.

The negative performances underpin the showing in the JSE All Share, down 13% at the beginning of December 2018, or 10 000 points off its January high. It is indicative of a market that had repriced significantly to the weaker side as the realities of a hawkish US Federal Reserve (Fed), US-China trade tensions, and local political and economic challenges made an impact.

The overriding feeling is that the good times have ended. That the extraordinary decade of cheap money has finally come to an end.

Normally, lower valuations would entice buyers to re-enter the market. But this time there is increased hesitancy to “buy-in-the-dip”, the typical hallmark of a bear market. Confidence is lacking. Fear is lurking. The focus is on the negative. Positive catalysts are hard to come by.

All indications are that investors should brace themselves for another bumpy ride in 2019 as global markets continue to adapt to the new realities.

At times it might appear as if the Fed could soften its hawkish stance somewhat. Or that a breakthrough on US-China trade issues is achievable. And that fading global GDP growth, centred on China, might be averted.

But as a whole, certain things seem to be incontrovertibly in place.