Latest News
It all starts, and ends, with government
Dr Francois Stofberg
Senior economist and head of sales: Efficient Private Clients
There are many rumours going around again about how bad our economy will perform this year, and possibly in the years to come. Many South Africans blame a variety of aspects for this poor performance. If your political convictions lean to the right in South Africa (SA), you have the more erroneous view that government can do a better job than the market when it comes to allocating scarce resources. Your answer to the current low economic growth environment is, therefore, to nationalise resources. However, history shows that, when countries force their populations into this direction, they seldomly put their citizens in a better position. Even in those isolated cases where resource nationalisation leads to the widespread improvement of livelihoods, it does so at the cost of individual freedom, something that South Africans cannot stomach. If, on the other hand, your political convictions lean to the left, you have the less erroneous view that we are underperforming because government has ruined the economy: A free-market approach is not always better but, in this case, it is the lesser of two evils. It is true that government ruined our economy through their unhealthy direct involvement (such as Eskom, state capture, and corruption), which stems from unhealthy policy (wealth redistribution rather than wealth creation), which stems from not having accountable leaders (we all know their names). For this reason, we tend to focus on government when we consider economic performance. Because it all starts, and ends, with government. And, to a large extent, the private sector is only a price-taker in SA.
Government is by far the largest player in SA and, just based on their sheer size, their voice carries the most weight. If you consider government in its totality, including state-owned enterprises, government can represent anywhere between 35% and 40% of the South African economy. But what makes the influence of government so much greater is its ability to dictate policy; it sets the rules that everyone must play by. In this way, government not only influences the economy as its largest participator, but it also impacts everything and everyone else by regulating what the rest are allowed to do, and how they are allowed to do it, or not. So, if policy is unhealthy, everything else will be unhealthy too.
Unfortunately, the South African government has, over time, started to believe the lie that they can create a larger economy by redistributing more. But how is it possible to create more pies by slicing the same pie into smaller pieces? Redistributive policies, such as broad-based black economic empowerment (B-BBEE), can, therefore, at best, lead to social development, but not to economic development. Social development is like handing out fish (or grants): It can only feed someone for a day (or a month), but it creates dependency and places an unrealistic burden on the economic fibre of a country. This is because, over time, more people become more dependent and hungrier, that is, more demanding, and we go from wanting grants to wanting free tertiary education too. Economic development, on the other hand, teaches people how to fish, that is, it creates jobs by increasing the size of the pie or by creating more pies. Economic development thus forces society to become more accountable, not more dependent.
Redistribution cannot create jobs, otherwise unemployment in SA would have improved from the 1994 low of around 22%, and not have deteriorated to 34% where it is currently. Redistribution kept out of check eventually drives a country into the poverty trap. The reason for this is because redistributive policies, such as B-BBEE and policies that protect employees at the cost of employers, cause resources to be allocated sub-optimally. And wherever resources are not optimally allocated, inefficiencies arise, and if inefficiencies compound over three decades, a country falls into the kind of lower-for-longer economic growth trap that SA is currently in.
So, what do we need? We need more accountable leaders in the private and the public sectors. Leaders who can implement policies that create wealth. Leaders who can be held accountable. Leaders who are chosen based on merit. Because of their size and influence, it all starts, and ends, with government.
Is erratic market behaviour here to stay?
Dr Francois Stofberg
Senior economist and head of sales: Efficient Private Clients
Benjamin Graham, Warren Buffett’s mentor, once described the global stock market as a manic-depressive person whose erratic behaviour changes daily. Let us call this person ‘Mr Market’.
For the past eight months, Mr Market’s mood has been affected by external circumstances, such as negative macro-economic data and geopolitical tensions. But Mr Market’s mood has also been plagued by internal circumstances, such as tighter monetary policy. Unfortunately, the only remedy for Mr Market’s illness, for now, seems to be a dose of certainty, which is not available yet.
Erratic market behaviour was especially evident during the month of August. Halfway through the month, the MSCI All Country World Index (ACWI), a globally diversified index, traded 3.5% stronger only to lose those gains, and some more, by month-end. The ACWI ultimately closed 3% lower compared with July.
Several factors contributed to the topsy-turvy environment. Early in August, markets reacted in a nonchalant way to Nancy Pelosi’s visit to Taiwan. An irritated China, however, caused markets to rethink their nonchalant reaction and markets seemed uneasy. Nevertheless, markets then accelerated on the back of lower inflation data and relatively stable consumer spending data out of the United States (US).
Although inflation was still high, rising to 8.5% in July, measured from the same month a year ago, it was down from the 9.1% reading during June. Inflation in June was already so high that it marked the fastest pace of growth since November 1981. What seemed like a slowdown in inflation, along with other slightly more positive economic indicators, led investors to price in peak inflation, thus extending the short-term market rally.
A strong US consumer also supported the markets. US consumers continued to open their wallets in August, shifting savings from falling gasoline prices to purchases of everyday goods at places like Walmart. Consumer spending across the US was supported by a resilient labour market and an increase in people travelling during the summer period.
And then, mid-way through the month, things got interesting. Stock markets were caught completely off-guard by the sudden change in sentiment towards growth and inflation. Bond markets, conversely, seemed to have figured it out in advance, being much less volatile than stocks.
Bond markets were already nervous about a looming recession and the US Federal Reserve (Fed) Chair Jerome Powell’s speech in late August. In his speech, Powell provided an aggressive outlook for further interest-rate hikes in an attempt to tame inflation. It seems that bond markets correctly priced in the Fed’s message. The steady bond markets could also indicate that they were already anticipating a potential ‘hard landing’ for the economy, while the stock market only came around later. Adding to the pressure on stocks were declines in the technology sector, more specifically, chipmakers.
Locally, our market followed the same trajectory as its global peers. The Johannesburg Stock Exchange closed 2% lower for the month, with financial companies leading the declines. The 15 biggest financial companies lost almost 4% of their combined value for the month on the back of a stronger dollar and global recession fears. Politics also kept things interesting when the Pietermaritzburg High Court granted an order to force Jacob Zuma to pay back nearly R8 million spent on upgrades to his Nkandla residence. This was a welcome sign for most.
Going forward, historically, September is the worst month of the year for equities. Just two months have delivered an average negative return for stocks since 1945: February and September. It is, generally, believed that investors come back from their summer vacations in September and want to sell some holdings to lock in gains for the year. However, we might avoid the September-selling trend this year because much of the de-risking has already occurred, thanks to the historic collapse that we saw during the first half of 2022.
What is certain for Mr Market is that he will continue to place strong emphasis on macro-economic data throughout the month of September. This is something that we will continue to monitor as we steward your capital with diligence and providence.
Professional Stockbroking Portfolio Management
Stockbroking Portfolio Management
Historically, the stock exchange, stock market and trading in stocks, shares, bonds, and cash have been intimidating to those inexperienced in the area. There has always been the perception that stockbroking portfolio management is reserved for the wealthy risk-takers of the financial industry or the technically astute businessman when, in truth, the fine art and selective science of stockbroking portfolio management are neither technical nor difficult, and can reap tremendous rewards and dividends. Still, it is always wise to seek the support of a specialist to limit risk and get the most returns.
Stockbroking portfolio management is, by definition, selecting and administering a group of investments that meet the long-term financial objectives of a specific client, company, or institution. This involves building and managing a selection of elected investments that will meet a client’s financial goals and specific risk tolerances for the preferred result of producing a profit.
All Roads Lead to Rome
Effective stockbroking portfolio management can be done in many ways. After all, many roads eventually lead to Rome, but the two most preferred ways are active and passive portfolio management.
Active stockbroking portfolio management is when individual stocks and other assets are strategically and, sometimes, aggressively bought and sold to beat the performance of a specific index, whereas the passive approach is a long-term game-plan which entails mimicking the make-up of a particular share or index to match the returns of the market.
In both cases, individuals can, and do, create their own strategies, and invest autonomously in these markets to gain profitable returns, but going at it alone poses greater risks. An incorrect or misperceived opportunity can be costly and, in some instances, take years to recover from. This is where the stock markets have earned infamous reputations.
Longevity is Best Left to the Professionals
Speaking of getting to Rome along different roads, there are also many other ways to approach stockbroking portfolio management strategies, including asset allocation, diversification, and rebalancing. Some are high risk with high rewards, and some are meticulous and calculating for a consistent result, but only a few of them will meet your particular goals, objectives and risk profile. This is why the process is best left to the professionals.
Efficient Wealth, in collaboration with a leading South African stockbroking firm, has put together a stockbroking portfolio management solution that meets the needs of even the most selective investors. Regardless of your expertise, knowledge and understanding of capital-market arenas, Efficient Wealth has created a system that is purpose-built and continually adjusted to take heed of the ever-changing trading environment.
Why Efficient Wealth?
Our offering includes broker-based, fully discretionary and non-discretionary stockbroking portfolio management services, as well as online trading solutions. We provide these services through an industry-leading electronic platform or a preferred one-on-one relationship with a specialist stockbroker. Complementing this, we offer a variety of value-added research reports, information sessions and personal consultations.
Everything we do is driven by our desire to minimise risk and maximise our clients’ well-being Contact us to safeguard the longevity of your trading assets and achieve the results you seek.
Investment Management Services
What is Investment Management?
Investment management is the overall oversight and administration of a portfolio. In addition to buying and selling assets on a client’s behalf, Efficient Wealth’s wealth managing professionals, who specialise in investment management, determine the future course of our clients’ interests and develop incisive investment strategies to suit our clients’ specific risk profiles, objectives, future needs and financial goals.
Whether you are an individual investor or a small- medium- or larger-business entrepreneur, our investment management professionals will create financial portfolios specifically tailored to all of your or your company’s needs. Because Efficient Wealth does not box and package portfolio profiles, it enables us to be flexible and receptive to market trends, while offering greater expertise, more personalised portfolios, and more resources than any of our competitors.
Investment Management – A Great Idea, But Where Do You Start?
To better understand investment management, you need to understand how your financial needs will change as you get older. Right now, you might be thinking about marriage, children, buying a house or expanding your business into new market ventures, but, in thirty years’ time, you might be thinking of purchasing a cottage by the river and enjoying painting as a pastime.
Regardless of your age, it is never too early (or too late) to plan your financial future. So, whether you are newly retired, cruising along mid-career or you’re just starting out, there isn’t a better time to begin with investment management and planning your financial future than right now. But where and, more importantly, how do you start?
From Start to Finish with Efficient Wealth
Perhaps you’re yet to begin your investment management journey and need all the guidance you can get, or you are looking for faster growth in a safe, interest-bearing environment, or you’re simply the cautious heir to an inheritance who may be content with your current portfolio but want to keep up with the pace of inflation. Whatever your unique needs may entail, you will want to know that your financial interests are being managed by wealth creation professionals who are driven to support you in achieving your personal investment management goals.
That is why our clients trust us to manage their financial interests. From young professionals just starting out in their chosen careers, mid-career business merchants and new or evolving business owners to newly retired individuals enjoying the well-deserved fruits of their life’s labour, our passion is to assist our clients with investment management strategies at any stage of their lives.
Efficient Wealth Is in it with You for the Long Haul
Efficient Wealth offers a range of financial services, including investment management. If you are evaluating your finances and feel that you can’t do it alone, or your current financial services provider isn’t quite living up to your expectations, or perhaps you’re looking at increasing the interests that you already have or want to make informed choices about how you’re spending your money, then get in touch with us as our carefully selected panel of professionals will offer you a bespoke solution to put you first.
Professional Financial Advisors
Financial Advisors to Support You on Your Life’s Journey
Consider adopting the assistance of a professional financial advisor because, no matter how hard you try, sometimes, it just becomes too much. Juggling a fast-paced career, a start-up business, or a going concern that consumes your every waking moment with a family, domestic obligations, and your personal and professional financial responsibilities. It can become too much, and you may require support.
‘Adopting’ a financial advisor is the appropriate term, because, when you enlist the services of the right financial advisor, it should be a lifetime commitment. What you do not need is someone who is only in it for their own gains, advising you exclusively for their own short-term profits or guiding you along the path of bulk-packaged investments that do not suit your best interests. You also do not want to wade through all these challenges on your own.
What you need is a professional who grows with you, believes in you, rolls with the punches that life might throw at you, sees you through hard times with the right advice, at the right time, and celebrates your successes. You would want someone who will look after you – a financial advisor you can trust.
Rely on a Financial Advisor You Can Trust
Efficient Wealth can meet the challenge. Established in 2003, we have built a reputation of trust with our clientele remaining committed to their growth and prosperity in their personal lives as people, as families, in their professions and their businesses.
We have earned trust by the innovative creation of personalised, one-stop solutions for our clients that not only meet but exceed their expectations. We offer tailor-made, carefully selected finance options and investments that fit their pockets, allowing their money to work for them and protecting them when the going gets tough until their goals are achieved and they’re making more money.
However, making more money doesn’t mean taking on more risks. Making more simply means wasting less and one of our professional financial advisors will introduce you to efficient financing products and services that take up less time and offer you more returns.
Isn’t it Time for You to Let Go of the Reigns?
At Efficient Wealth, we understand the importance of your money. After all, it must last you comfortably for the rest of your life and must take care of your nearest and dearest when you are no longer there to support them. We also understand that it might be difficult to let go of the reigns. So, let’s meet you in the middle.
Let us earn your trust. Our financial advisors possess a wealth of knowledge and years of experience, each with a diary of satisfied clients. They can advise you on your finance-related questions, from managing your personal finance to growing your business, and they will create a financial lifestyle designed specifically for you.
You needn’t burn the candle at both ends as you attempt to manage all aspects of life on your own. Let go of the reigns. Let us introduce you to a financial advisor that will journey life’s ebbs and flows with you.
Financial Consultants and Financial Advisors
The Difference Between Financial Consultants and Financial Advisors
Whether it’s in your personal or professional life, or within the structures of your own small- to medium-sized business, should you have been advised to employ the aid of financial consultants to assist you with a financial concern, you might have come across the titles ‘financial consultants’ and ‘financial advisors’. After all, they would both boast similar, if not identical qualifications, come from similar finance backgrounds and would both carry the relevant certifications of practice.
This conundrum is understandable. In the industry itself, these roles would often be referred to interchangeably – an industry habit, in this instance. This creates some muddying-of-the-waters for laypersons but, in reality, each of these titles has its own specific roles and specialised functions within the finance industry. So, where do financial consultants fit in?
Solving that Niggling Itch
If you play a sport, for example, tennis, and you are an accomplished player but have a niggling itch with your first serve, you will need to rectify that all-important first serve-ace power stroke to perfect your game. For that, you would employ a serving coach who would break down your serve and carefully rebuild it, and through keen observation, consistent learning, and practice, begin fixing that specific issue in your otherwise flawless game. Once this has been accomplished, the serving coach’s job is done. They have fixed that niggling itch and they move on to the next faulting server.
This is what financial consultants specialise in. They are the serving coaches for short-term and immediate financial itches. For example, you need immediate guidance to study towards a degree; or perhaps you found out that a baby will be joining the family and you need additional healthcare; or you’re thinking of changing professions or opening your own business; or you have an existing business that needs assistance with short-term solutions, like employee benefits or cash management guidance.
In these instances, a financial advisor would advise you to consult with a team of specialised, short-term financial consultants. These professionals would then come in, analyse the specific areas of your life or business that need individual attention, offer advice on potential solutions and allow you to implement them. They would then coach and monitor the advised solutions’ progress and, once the solution is adopted and is up and running, the itch is relieved, and they would move on.
Enlist Financial Consultants that Work for You
Efficient Wealth is a company with many offerings, one of which is identifying immediate financial problems and offering genuine solutions that would best suit your needs. Since 2003, Efficient Wealth has been bringing our brand promise to life with intelligence, insight, foresight and innovation. We work to ensure your efficient wealth.
Our carefully selected team includes financial consultants that are flexible, human, and approachable. We are personally invested in the welfare of our clients. If you need a team of specialised financial consultants, click here. We will get rid of that niggling itch. It’s what we do.
Where does that leave us?
Dr Francois Stofberg
Senior economist and head of sales: Efficient Private Clients
Markets in the United States (US) were shocked when Federal Reserve (Fed) Chair, Jerome Powell, gave his annual address at the Central Bank Summit in Jackson Hole. In the past, this event has been used to make important announcements about central bank policy. In the early 2000s, US central bankers used the event to announce that they would start cutting interest rates to support economic activity, which finally led to the 2008/2009 global financial crisis. A few years later, US central bankers used the event to announce quantitative easing, which supported the recovery, overstimulated global demand, and led to rapidly rising equity prices. Now, more than a decade later, Powell took a firm stand in favour of further interest rate increases in the US “until the job is done” on inflation.
US markets tumbled after the announcement, with the S&P 500 falling as much as 3.4% and the technology-heavy Nasdaq Composite sliding 3.9%. It seems that previous expectations that the Fed might slow down the pace of interest rate increases, or that they were even considering when to start cutting interest rates, were premature. Some analysts even interpreted Powell’s recent message to mean that the US will experience an unpleasant period but that it is needed. By this, they mean that a further economic slowdown and potential market correction is needed to cool off the economy and thereby contain inflation.
Where does that leave us? Well, I think it was a bit silly to believe that the brief slump and the partial recovery that we saw in global markets this year was all that there would be. The pain caused by an interest rate hiking cycle is usually a bit more severe. Although the US entered a technical recession, their economy is still far away from the type of correction that is needed to reduce inflated demand, which was caused by more than a decade of loose monetary policy. For this reason, the Fed is targeting unemployment closer to 4.5%, which they believe is one of the measures that will indicate that inflated demand has, in fact, subsided. We can, therefore, easily see markets in the developed world correct by another 10%, maybe even more, as central banks continue to press for higher interest rates.
But does this mean that the US will enter a long-term cycle of stagnation, where economic growth remains under pressure for more than two years and where markets persistently underperform? Probably not. However, the European Union (EU) might fall into a long-term stagnation because the appropriate response to combat high inflation requires policy flexibility, where each country must be considered individually. That being said, the European Central Bank’s main policy tool is an EU-wide interest rate that lacks flexibility. Increasing interest rates is the fastest way to tame demand-driven inflation, but while Germany will be able to live with higher interest rates, Greece and Italy, among others, will, most likely, enter a persistent slump. Relatively speaking, the US will, therefore, most likely, be in a better position than the EU, which is why the dollar should remain range-bound around parity against the euro in the immediate future. Once the EU has caught up in their rate-hiking cycle, and if they can get the economic block out of recession territory, the dollar might start to depreciate markedly against the euro.
In South Africa, because the balance of payments is coming under pressure, while the economy struggles under the burden of bad policy, a deteriorating Eskom, and silly demands by trade unions, it will be difficult to see the rand return to its long-term natural range of between R14.50 and R15.00. A more appropriate rate which long-term investors should, therefore, consider is R16.00 against the US dollar. We still maintain that the volatility that we are experiencing in markets creates good long-term buying opportunities and we warn against being too conservative. Corrections do not come by very often and they should, therefore, be seen as buying opportunities, not as exit opportunities. Furthermore, when deciding to invest, both the rand and the level of global markets should be considered. Both can be used simultaneously to find appropriate entry levels.
Diverse Investment Management Services
What are Investment Management Services, and Do You Need Them?
Investment management services are a type of financial service that assists people in managing their investments. These services are typically offered by banks, brokerage firms, and other types of financial institutions, as well as investing firms.
Wealth management is primarily concerned with the protection and preservation of an individual’s assets while advisory services guide on how to grow those assets. Read more
Business Cash Management
Business Cash Management: Investments for Liquidity
Business cash management is essential to ensure your business is ready for growth and to mitigate risks. A good investment strategy makes provision for a percentage of the funds to be liquid for usage on short notice. That said, shorter-term investments don’t deliver the optimal returns of long-term, well-planned investments. The secret is to strike the right balance and invest wisely to ensure your portfolio includes investments for short notice use that also deliver superb returns. Read more