Hi All

Fresh lockdown restrictions and resultant concerns about world economic recovery are with us. Spikes in Coronavirus case counts in many parts of the globe are being attributed to the re-opening of economies after the initial lockdowns. Although evidence is still gathering and some of it shows that infections are more localized than previously, markets have taken a dim view and started selling off quite heavily.

Traditional indicators like the prices of copper, oil and gold have also tanked, while there is a new strengthening in the US$. Lower commodity prices indicate foreseeing a slow economic recovery and the stronger Dollar is investors seeking a safe haven during a financial storm.

None of this is particularly surprising given the pace of market recovery post selloffs earlier in the year. Perhaps investors are realizing that awarding companies with high earnings multiples is unwise when one cannot even see an end to restrictions, never mind speculating what economic reality will look like afterwards.

A consolidation in markets was overdue and is welcome at this time. We need to see the Covid situation play out more conclusively so we can start to reimagine the world without it dominating any longer. For me the “marker” now is a total reduction (virtually to nil) in Corona case count. We cannot move forward till that is in place. If it isn’t going to happen, we need to know that too so we can figure out how to live with it and have meaningful economic activity at the same time. Obviously experience so far has produced learnings, but we are still some way from knowing sustainably workable health/economic balances.

For the meantime, I believe a cautiously optimistic approach remains the correct strategy. Opportunities will inevitably arise at the appropriate time in the future.

More next time

Kind regards,

Ricky Williams
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