We have been expecting rates cuts for over a year now, and they have finally arrived.
On September 18th, the Federal Reserve cut interest rates by 50 basis points, followed by the South African Reserve Bank’s 25 basis point cut the next day. Inflation has eased within target ranges in both countries.
The impact? We’ve seen some significant positive market swings. The rand is trading at its best levels in two years, with no indication that this strengthening may cease anytime soon.
The JSE is now at all-time highs, up 20% in the past year. Factor in the strengthening of the rand, from over R19 to the dollar a year ago to R17.15 today, and that’s an additional 10%. So just being in the JSE with ZAR exposure has resulted in a relative 30% USD return—a remarkable outcome.
Chart: JSE All Share Index
Market Moves Come in Short, Unexpected Windows
These market swings were long anticipated, but when they finally came, they arrived much quicker than anyone expected. This got me thinking about an old adage: It’s time in the market, not timing the market. The recent sharp rise in equity prices underscores this perfectly. Who would have guessed that these past few weeks would be the moment for such large jumps, particularly in the local market?
It reminds me of one of my oldest investments. Back in June 2008, just before the Global Financial Crisis, I invested R14,000 while I was still at university. The timing was dreadful—over the next four years, my portfolio was flat, barely recovering to break even. Had I been meeting with an advisor back then, I might have fired them, asking, “Why aren’t you doing something? Why didn’t you see this coming?”
The Long-Term Perspective
Below is a chart showing 16 years of performance. What stands out are four distinct periods where returns were essentially zero, spanning multiple years. These were times when it felt tempting to sell out, to cut losses, or to move to safer ground like a money market fund.
Chart: The University Portfolio
I counted 4 periods where we had to wait multi year periods just to get back to where we were at the start. But each of these periods was followed by a sharp rally, where the bulk of the returns were made in short bursts. If you stayed invested, those rapid recoveries made all the difference.
How would you have felt in each of these periods?
I recall client meetings during that third flat period (2017 to 2019), where portfolios had stagnated for years. Those were tough years and tough meetings. Unfortunately, many people capitulated and withdrew their funds or moved to money markets. They missed that final run at the end which happened over a short period and very quickly.
Why Having a Plan Matters
This is exactly why we have a financial plan in place. It’s designed to help you endure those frustrating periods of little or no returns, so that you don’t react emotionally and miss out on the market’s eventual gains. Sticking to your plan means you’re prepared for the ups and downs, and positioned to capture those key moments when the market surges. By maintaining discipline and focusing on the long-term, we ensure that you’re not just chasing short-term moves but building lasting financial security.
Trust your plan and stay the course.
