Hendrik du Toit, chief executive officer at Investec Asset Management has commented that this w...
Hendrik du Toit, chief executive officer at Investec Asset Management has commented that this week's devastating events were 'an act of terror not an act of war'. Toit stressed that there is a fundamental difference between the two and urged investors to be discerning in this regard.
Toit said: "Although markets will obviously react to factor in the increased risks of recession, we believe a disorderly fall of more than 10% is unjustified. A cautious approach is advised, as the risk of whiplash by venturing into or out of the markets during periods such as these, is immense."
Toit added: "Instant reactions and prognoses, at this stage, can only be guesses and no more, and it is for this reason that we must stress that rational behaviour must prevail and decisions based upon panic are far more risky than waiting for clarity before making rational decisions."
In the short-term Investec is adopting a very cautious approach expecting weakness, but it thinks a large portion of this will be sentiment-driven, it also warned against being caught in a frenzy of sentiment.
In the long term internationally and with regard to equities, Investec said as a result of a sentiment driven sell off, potential value may be offered, but a rush to enter the market is not anticipated. The group said government bonds will be buoyed by increased liquidity and a flight to quality but non-government, higher yielding bonds may prove less attractive. Investec thinks the US dollar will remain under pressure, although ironically, will be limited given the "safe haven status" it enjoys. Investec's portfolios have long held the view that the US Dollar is overvalued and are correctly positioned in this regard.
The group's global house view is underweight equities, with a bias towards Oil, Pharmaceuticals and Consumer stocks, which it hopes will provide defensive positioning. The group says its holdings in banks and insurance counters will need to be monitored closely. The group is overweight fixed income which it says will benefit from any flight to quality and its credit exposure is very underweight, so it doesn't expect to be affected by any widening of credit spreads.
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