It’s been a tough time for markets, with nowhere to hide. At the end of April 2022, global equities were down by 13%, but it’s the global bond market that seems to be worrying investors the most. Global bonds recently posted its biggest loss since the 1920s!
This big loss is driven by concerns around global inflation and the fact that multiple interest rate hikes are on the horizon. Bonds may not seem like the obvious choice for investors right now, but history shows us they may be worth a closer look. This infographic demystifies 3 common myths about bonds during rising interest rate cycles:
- “Never hold bonds during a rising rate environment”
- “This is the worst time to invest in bonds”
- “The long-term view looks dismal”
We are currently seeing massive shifts of money out of global bonds into cash, a move generated by many of these myths. We would argue that this “all or nothing” approach can be dangerous and can destroy value. Over the long term, bonds often soften the blow of a global equities decline, and history shows that bonds can be resilient during periods of rising interest rates.
This once again highlights the importance of taking a long-term view of your investments and ensuring your overall portfolio holds various elements of diversification.
Humanity faces numerous global challenges, the biggest arguably being global environmental issues and sustainability. We are currently consuming roughly 1.75 times what our earth has to offer. In other words, humanity is taking more than the earth can sustain. These challenges are now shaping the way we think about our investments and the companies we invest in.
We recently had our annual INSIGHT webinar, and for those that missed it, I wanted to share this presentation by Brandon Zietsman, Founder and CIO of PortfolioMetrix. PortfolioMetrix is our strategic asset management partner. They construct and manage all our client investment solutions both locally and globally. In this presentation, Brandon looks at our planet’s history and how we got to this point, and why it’s important to change the way we invest our money.
This is merely an introduction to the topic of ESG Investing. ESG stands for Environmental, Social and Governance, three factors that now form part of most investment analysis processes - they help identify material risks and growth opportunities. At Foundation, it is a topic close to our hearts and you will see more on this during the year in our various publications.
Political analyst, JP Landman, recently used this wonderful quote from Steve Jobs as the inspiration for a piece he wrote about the SA government’s economic policy. Landman plotted the dots of various elements in our macroeconomic framework over the past 4 years and spent time looking backwards to see if we have made any progress. To my surprise, we have made significant progress in many areas. I think it’s surprising because, for many of us, it’s difficult to see progress when we are faced with challenges like failing infrastructure, floods and loadshedding. As this is an important election year for the ANC, we are likely to read and see a lot of “noise”. I do think Landman’s findings serve as an important reminder of where we have come from, and I hope it leaves you with a better sense of where we are going.
I hope you enjoyed this month’s edition.