JOHANNESBURG – It is understandable for investors to feel jittery in the run-up to the national elections, but giving too much air time to market noise is never a good idea, says Allan Gray’s Rob Formby.
Whenever elections approach, market uncertainty increases. Pre-election jitters knocked the Business Confidence Index in March to its lowest level since August, according to the SA Chamber of Commerce and Industry. It dropped to 91.8 in March from 93.4 in February, with load-shedding, the electricity tariff hike and a slump in manufacturing weighing on the index.
“The first quarter of 2019 has been characterised by a lot of market noise,” says Rob Formby, chief operating officer at Allan Gray. “There’s been political noise as parties gear up for the general elections, noise generated by our energy-supply crisis, the noise around crucial policy decisions and economic noise around South Africa’s growth figures.”But just because it grabbed headlines doesn’t mean all information is helpful.
“Switching funds in a knee-jerk reaction to short-term market conditions can impact your investment success over the long term by locking in losses. This inevitably destroys the value of your investment. “If you can sit tight and ride out the volatility, you will have a better chance of enjoying long-term returns,” he concludes.
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