I have written this article a number of times in my head. I was mostly looking to provide some guidance on what is available to support you, as our client, from a Government perspective. These packages and extent thereof is continually morphing as the true scale of this Pandemic encircles the world. This means that all details in this message could be outdated in a day, a week or even a month. Stay safe and healthy, wash your hands, look out for those less fortunate then us.
What I am focusing on are relief measures available to you from a financial planning perspective. You can find numerous advisory opinions on our large law firms websites. Along with this you would have received numerous communications from product providers and other relevant institutions. Read widely to be informed and know that we are here to support you, your family and your business through this.
Markets & Investments
Uncertainty and fluidity remain, don’t get caught up in a fear-based existence around this. It could potentially paralyze yourself into inaction and one wants to be full of action in these unique times.
When it comes to your investments, the opposite is true, unless you are looking to be investing more. Truth be told they are all over the place. Consider what happened to The West Texas Oil Futures price yesterday (21 April). It went negative for a time. Say what? Yes, negative. I am not even sure what that means… Were the oil producers paying people to buy their oil? Did someone have to take delivery of a whole lot of their product? To many questions that do not really require answering. Base rationale is that there is too much oil and not enough demand = price drop.
In our investments there is a similar thing going on. There is decreased demand for goods worldwide which means that all our companies are going to make less money and this has an impact on their value. Combine this with a fear that everyone has that our world is going to end tomorrow and markets go to hell as our collective irrationality comes in to play.
Then as things begin to normalise, as people realise that the sun will still rise tomorrow, we will go back to our normal lives at some point, markets will recover – as they have already.
In figures – The JSE ALSI (All share index) hit a low of 37,900 on the 19 March and then bounced back to 49,800 on the 14th April. A drop of 35 % from January and then a 31 % recovery in a month. We have retreated to a level last seen 10 years ago and its going to be volatile. If you then look global markets around the same time frame. Here is there volatility:
- Nikkei – 30 % down and a 20% recovery from that low;
- S&P 500 – 34 % down and a 28 % recovery also from that low…
The list goes on across the world. This was a globally synced crash and accompanying volatility will be here to stay until such time as the scale of this is truly understood. My view is that this could take 6 to 24 months to play out properly. Which Government is deploying a winning strategy will only be seen as this unfolds. What is sure is not a good one is that employed by the UK and US. Strange enough both countries that have, recently, employed insular strategies to protect themselves. Their leaders are and will be affected by their decisions around this.
I am proud to say that SA has acted decisively and effectively on this pandemic. Once again, whether their strategy is a winning one that can spring back into growth is still to be seen.
Once again I refer you to my article that I wrote previously around staying the course and how markets have done this in the past and will continue to run in cycles like this into the future. Here is an article I contributed to back in October 2008 – advice remains the same no matter the time period… So if you are losing sleep because of this and your investments then there are two things you need to consider:
- When do I need this capital?
- If this is more then 3 to 5 years into the future – your risks of actually seeing any losses are low. Longer then 5 years and you are likely to have recovered all of this paper loss and made gains on all the extra monies you are investing from now till then.
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- What can I control?
- What is required now is a level head and patience, do not act irrationally and emotionally about your portfolio. We cant control where the markets move, especially when a ‘black swan’ even hits us like this. So do not react because we can provide numerous examples of how, statistically, staying in the market is a better strategy then cashing out.
Worst case scenarios
Yes there are a lot of doomsayers and fear mongers out there that will spout numerous other examples of how this is the end of days for African and even global markets. That our world is fundamentally changed and we will be stuck indoors having Zoom meetings forever eating our canned food with plastic forks.
I don’t see that as our lot as we humans are very good at forgetting and reverting to what we know and love. Hugs, conversations and interactions will become the norm again. Social interactions and business as usual will return. Yes things will be fundamentally different in some ways but in others we will go back to the way things were.
My optimistic view is that we will take those things that are good and leave the bad habits behind.
What I can encourage is reading widely and understanding what is going on. By having knowledge we can decrease fear and encourage stoicism. By standing together and helping one another we can see one another through this. My real hope in this is that this drives us as a local and global community closer together.
Insurance Policies & Support Offered
This is for short and long-term insurance policies including medical aids. I am also going to talk generally as all Companies are treating this differently in their support for their clients. There are three broad offers:
- Decreasing your premiums or even suspending them for a period – please note that your cover is also suspended or reduced.
- Funding your premium from an investment or savings that is part of your policy. Using your money to cover the premiums which you owe in terms of the policy agreement.
- Some are giving discounts are being offered where your cover is retained at the same level for a lower premium. These are the best as your cover is the same and you are paying less. Please note that your premium will likely revert as things normalise.
These are all great initiatives and please make sure that you understand the implications of these on your policy over the long-term. This may mean lower investment values or you are incurring a debt that you will pay off hereafter. It is very important to know if your cover is suspended as you may not have any cover at all when you may need it most. It is also important to know how or if you can re-instate if you need it to trigger during this period.
As above, we are here to support you through this so please come to us should you need any advice or assistance. There is every reason to ask and enjoy relief options available for businesses and individuals during this period.
YouTube, Podcasts and Instagram
Here is a YouTube video breaking down COVID-19 – Coronavirus: Virology, Epidemiology, Pathophysiology – basically how it works, what it affects/infects and what we know about it as an actual virus. Simple and easy to understand… https://youtu.be/YRfwZcLeOm4
On being stoic – Stoicism – is a great virtue in this time. Listen and enjoy – https://tim.blog/2020/04/09/ryan-holiday-stoicism/
If you need some motivation look no further then my partner, friend, wife and an amazing coach – Ashlea Barker – follow her IG feed and get your daily shot when needed in this crazy world we find ourselves… https://www.instagram.com/ashleashle/
