The equities market has been flat since July 2014 — five years of almost no returns on share investments. It is thus extremely tough for stockbrokers and others to make the case for their clients to trade. They’d rather be in cash, and if they go onto the market it is only to buy passive investment vehicles such as MSCI World tracker funds. SA equities are a hard sell.
But when retail investors are most bearish, it is often the best time to buy. A recent study on US markets in the Financial Analysts’ Journal found that retail investors are a good contra-indicator for future returns. They are overly miserable after negative returns and overly bullish after positive returns.
Comfortingly for professional market analysts, this wasn’t true of them. And it is their views that have greater influence on future performance. But it shows that policymakers can sometimes focus on the wrong thing. It’s not about convincing the masses to believe; it is about making genuine structural reforms that change the economy’s potential to generate wealth.
The problem for SA Inc is that the professionals are not positive either. The series of delays to structural economic reforms that could move the needle on SA Inc is continuing to feed into a loss of interest in SA. It’s hard to attract international attention when you’re contributing only 0.4% to global GDP.
After Cyril Ramaphosa’s election as ANC president in late 2017 there was a spark of interest. But that has since dissipated, despite the efforts of the president’s investment envoys and events such as the investment conference next week.