2015 started on a tragic note when two brothers stormed the offices of Charlie Hebdo, a French satirical magazine, killing twelve and injuring several more people. The attack was allegedly motivated by the publication of controversial religious cartoons and was unfortunately not the only tragedy to hit the city of Paris during the year.
Closer to home, Proteas captain AB De Villiers thrilled cricket enthusiasts worldwide by hitting the fastest century ever off only 31 balls in a test match against the West Indies. He proceeded to make 149 off 44 balls, leaving commentators speechless and fans hysterical. The year was off with a bang!
In Johannesburg, it was time for the prestigious Raging Bull Awards early in February where the Stringfellow BCI Stable FoF won an award for best performance in the category ‘SA Multi-Asset Class Low Equity’. Little did we know at the time that this would be the catalyst that put in motion what can only be described as a pivotal year for the company.
In March, local stand-up comedian Trevor Noah did SA proud by being appointed Jon Stewart’s successor as host of the popular American TV show, ‘The Daily Show’. Stewart would leave the show after 16 years at the helm, leaving Noah under the microscope as Americans and South Africans alike were wondering whether he could fill the shoes of such an American ’institution’. Noah finally made his debut on the 29th of September, winning the approval of followers worldwide.
On the 24th of April, the ALSI hit an all time high of 55 188, up a staggering 11,5% YTD on the back of a strong push in commodity prices driving resource counters higher. At the same time, the oil price was increasing steadily – trading at around $65 by the end of month and while market participants expressed their concern at the prospect of the imminent end of the 6 year bull market, economists and academics felt that perhaps a turning point had been reached in the financial recovery and talk of a June US rate hike started to emerge.
May 2015 saw Stringfellow Investment Specialists move into their new offices in North Riding. With an expanding staff compliment and strong growth-oriented business plan, it was only fitting for the business to move into offices that matched its dynamic approach to investing.
In June we celebrated our 10th anniversary. AUM had reached X in the Stable Fund and Y in the Flexible Fund. Investors in our Stable Fund would have seen their money almost double over the last 5 years with Flexible Fund investors outperforming the Allshare Index by an impressive 20%, at a much lower level of risk.
That rate hike never came from the Fed in June, who cited “slack in the employment numbers” and “headwinds to global growth” as their reasons for remaining ever patient before increasing rates. This was seen as a negative assessment of global economies and by mid-July, stock markets had already cooled off – some with the ALSI down to 49 997. It was still up YTD, but well off its’ highs reached in April.
The ink on the Fed’s meeting minutes was not yet dry before speculation started up again and we would spend the rest of the year in what felt like a never-ending “will-they-won’t-they” debate. Every number out of the US, and every word out of Janet Yellen’s mouth was being analysed to try to establish when they would take action and while the world was looking west, we failed to pay enough attention to what was brewing in the east.
In August, the China bombshell hit. After several months (if not years) of disappointing data out of China and many market commentators expressing concern over the slowdown, the Chinese government implemented a series of devaluations of the Chinese Yuan that is usually pegged to the US $. The currency move reinforced anxiety that Chinese growth is slowing down fast, setting a global stock market sell-off in motion. Markets don’t like it when the second largest economy in the world shows signs of panic! By the end of August, the S&P 500 was down 11% YTD.
In SA, Stringfellow Investment Specialists was going from strength to strength. The team had now grown to 6 staff members in total – that’s a 200% increase from the beginning of the year. We had a newly defined brand identity and our targeted advertising campaigns on social media and on radio ensured that Johannesburg was getting to know more about our consistent superior performance.
During September and October, we had a welcome distraction from the markets – it was time for the Rugby World Cup, 2015! We may not have been everyone’s favourite to win the tournament, but no-one would have bet against our Boks in their first game against Japan. The shock defeat served as a wake-up call to the boys, who proceeded to convincingly win the rest of their pool games to reach the quarter finals and eventually play New Zealand in the semi-finals. It was a close game, but the All Blacks proved too strong for us and they went ahead to win the Cup in the final against Australia in front of over 80 000 fans at Twickenham.
By the end of October, it seemed like the markets had recovered quite nicely from their China/Fed jitters and many felt like the August correction served to rebalance the markets (that had run so hard for so long) to more reasonable levels. The oil price seemed to have stabilised in tight range around $48 – $50 and in South Africa, the ALSI was approaching the 54 000 level again.
Comparing the year to date to 2014, Stringfellow’s new business flows were up an impressive 133% by the end of October!
However, the rollercoaster that is 2015 was not yet done with us. On Friday the 6th of November, the US posted jobs data exceeding even the most optimistic forecaster’s expectations and the prospect of a December rate hike was firmly back on the table. Renewed weakness in Chinese data saw commodities drop to its’ lowest level since 1999 and refusal by OPEC to cut their oil production saw the oil price drop below the $45 mark.
With ratings downgrades from both Fitch and Standard and Poors early in December, South Africans cannot be blamed for thinking that the worst was over by the 4th of December, until our political environment made a turn for the bizarre; in a move that surprised even his own cabinet, President Zuma replaced finance minister Nhlanhla Nene with the relatively unknown David van Rooyen on the 9th of December. Wild speculation and mass outcries had not even reached full pitch yet, when Zuma caved and replaced Van Rooyen with the 3rd finance minister in less than a week. The re-appointment of Pravin Gordhan came as welcome news to a befuddled country and even more confused overseas observers, but the damage was done – investors had lost billions and the Rand is unlikely to recover from near all-time lows any time soon.
The most recent market moving headline for the year, came last night when the US Federal Reserve finally announced the first hike of US interest rates since 2006. While the markets have been anticipating this for several months and seem to be taking the hike in their stride, the longer term impact will only unfold over the coming months.
It is amidst all this turmoil that we go off on holiday for a well-deserved break at Stringfellow. How can we relax in the middle of all of this, you may ask? Well, as true long term investors we understand and have faith that this too shall pass. There is no denying that the global investment environment is challenging at the moment to say the least, but volatility creates opportunity. While the latest drop in the markets has been hard to stomach, it has given us access to well-run, profitable companies that were too expensive to buy a few months ago.
When we look to 2016, we are excited about the prospects of a “normalising” US economy and we see great potential in our markets. Bring it on 2016, we are ready for you!