Recovery Curves and the jaws of the Hippo

As more and more parts of the economy are starting to get going, there is a lot of talk about recovery and the shape of the recovery curve.

Recovery of the economy

There is an alphabet of recovery curves doing the rounds at the moment.

The initial thinking was that it was going to be a V shaped curve.

However as the lockdown has been longer than initially anticipated, the U and Nike swoosh shapes are more likely.

The good news is that the pundits say that the L-shaped curve is unlikely.

Rand dollar

The rand improved against the dollar over the past month. Some are calling it as a start of an ongoing improvement. It is too early to make this call but it is certainly something I shall be watching closely.

For those who want to invest offshore, the exchange rate is becoming more attractive

Local shares

Since the market collapse on 19 March, the JSE has rebounded by 46%.

I’m pleased to report that all my clients listened to my advice and did not shift their investments to different portfolio. Congratulations to those brave souls who invested shortly after the collapse - your bravery has been rewarded.

But before we get ahead of ourselves, the JSE is still 3% down on what it was at the beginning of the year.

Interest rates

We started the year with a repo rate of 6.5% and it is now 3.75%. The experts believe there will be further cuts this year and not much growth over the next 2 years.

There are all sorts of implications here especially for those who have used bank deposits to generate an interest income to live on.

Those using rental properties to generate an income may find some downward pressure on rentals as prospective tenants will be able to afford to buy rather than let.

The key learning is to diversify into a balanced portfolio of investments

Wills

I don’t want to get morbid but with Covid around there will be delays when it comes to processing estates. You don’t want your family to have any unnecessary delays because you don’t have a will or that your will still has your ex-wife or late mother as the beneficiary.

It is vitally important that you have an updated and watertight will.

Susan and I updated our one this week. When we calculated the cost of executing our old will we were shocked at some of the costs of what we wanted to do. By tweaking its structure we were able to save our beneficiaries R450 000 in costs.

If you haven’t done so yet, get your will updated and have someone look at the execution costs. If you need any help, I can refer you to a specialist that does this at a minimal charge.

Trivia

The Korean war started 70 years ago today. After the war, South Korea was in a shocking economic state. Their GDP was worse than Somalia’s. People were literally starving.

They rebuilt their economy and they now have the 12th biggest GDP in the world. With the right attitude we can use the current crisis to achieve great things

ENDS

Kenny Meiring MBA CFP ®

082 856 0348

Kenny@financialwellnesscoach.co.za

Financialwellnesscoach.co.za

Kenny is a certified financial planner and helps people understand the often bewildering world of investments, retirement and life insurance.

Disclaimer: The above does not constitute financial advice. It is offered as a perspective to help you make sense of these important developments. Each person’s situation is unique and a proper analysis is needed before advice may be given