Bull market at an end

So what about the local market?

While no overall individual market represents good value at present, over the past few months, both the RSA bond market and the Rand exchange rate have reversed, says Wayne McCurrie, deputy managing director at Advantage Asset Mangers.

While not quite yet in buying territory, they are both now in the "fair" value range, and he still maintains that the commodity cycle has peaked as they have been anticipating.

Local equity still does not represent fair value, but is not in danger of an imminent collapse, despite the reversal of the commodity cycle.

According to McCurrie fundamental value exists for the local market at about the 18 000 level, which is about 12% lower than the current level.

Investors who are of the opinion that the current market volatility is of a temporary nature are incorrectly interpreting the market. If we are right, then what is happening is the reversal of the commodity cycle, not just some sort of "consolidation" or "profit taking" phase.

We believe that the bull market that has been in place (and rightly so) for the last three years has come to an end. Our local equity market is still expensive, but not at extreme overvaluation levels that we have seen in the past.

While we do not believe that the local equity market is about to collapse, investors must temper their expectations and reduce any overweight positions that they have.

Global equity is still fairly valued, even if the prospects for excellent returns are limited. RSA bonds have probably reversed most of their overvaluation.