Are you informed enough to navigate the SA market?

The balance of power is slowly shifting away from the ruling party in South Africa. Following the local government elections that took place this August, the African National Congress (ANC) has gradually started to lose its grip – with the Democratic Alliance taking control of some of the country’s major metros, including Cape Town, Midvaal, Mogale City, Nelson Mandela Bay, Tshwane and now the City of Johannesburg.

Some people have been surprised by the recent results. However, at a post-election discussion hosted by WellsFaber in Cape Town, Premier Helen Zille and Richard Calland, political author with his upcoming book ‘Make or Break: How the next 3 years will shape SA’s next  both agreed that it was only a matter of time before the problems facing the embattled ruling party would catch up with them. 

Addressing the audience, Calland said that the elections were a telling sign of the country progressing towards a more competitive democracy. He said that politicians need to understand that they are accountable to voters. Calland pointed out that the electoral dominance of the ANC suffered a notable blow, with its core working class voters giving it a sharp rebuke. 

The future of South Africa and its economy remains uncertain, but there are learnings that can be taken out of these elections that can be applied to how people respond to market movements going forward. 

According to Carol Axten, CEO of WellsFaber, these types of conversations aren’t only important for us to better understand how we got to this political point in South Africa, but it is equally important in understanding what this will mean for the country and our economy in the future. 

With many investors becoming wary of the future of the economy and local market, particularly post the axing of the Minister of Finance Nhlanhla Nene in December last year, Axten says that it is absolutely critical that wealth managers and investors alike continually keep abreast of any developments and trends that take place in the local and international markets. 

She explains that by understanding the various challenges and opportunities in South Africa and abroad, investors will be better positioned to navigate the complexity of the financial markets. “Knowledge is not only power, but it’s also the foundation for intelligent, well considered decisions when it comes to financial planning and investing.” 

Axten says that the geopolitical landscape is changing rapidly, and with four more months to go in 2016, it may well turn out to be a defining year in the history of global geopolitics. “How this will impact financial markets remains to be seen, and we watch with great interest to see how events unfold and the impact they will have.” 

She cautions that it can be very tempting to make short-term changes to an investment strategy when markets become choppy, but this should be avoided at all costs. 

Axten points out that this can easily become a recipe for disaster. “Selling investments after their value falls locks in losses and often means missing the early gains in any recovery, which can be significant. This is a prime focus of the advice that we provide to our clients and is part of the reason why we host these type of functions. They ensure that our clients are better equipped to understand the market and the impact that that these events can potentially have on their portfolios.” 

She says that market volatility is normal. “It can be unnerving, but it’s part and parcel of a functioning stock market and economy. We keep a watchful eye on all our clients’ financial portfolios and make adjustments to them when required, but we never make sudden decisions that haven’t been thought through.” 

Axten explains that financial planning and investing should always be managed objectively instead of relying on short-term tactics. “This helps our clients avoid the trap of letting emotions drive decisions, as could have easily been the case with the local government elections, and keeps long-term plans on track and in line with an individual’s major financial goals.” 

“It is in volatile times like this where an advice business, such as WellsFaber, is able to add real value to their clients. Through formulating a financial plan and sticking with it through times of volatility, the long-term outperformance can be significant,” concludes Axten.