Positive returns for global and local equities markets despite economic climate

Global and local equities markets have seen positive returns on investment, despite major volatility as investors navigate higher inflation and interest rate policy environment this year.

Locally, analysts report that company earnings have surprised on the upside in what’s been termed a difficult economic climate.

Households, that dabble in investing in the markets over and above their pensions, are believed to have been better placed to handle the higher cost of living.

It is common cause that the lived reality on the ground in South Africa is a tough one for many, especially with the rising cost of living due to many low-income households as well as the country’s intolerable unemployment levels.

Inflation has also hit the middle class, as it erodes the value of everyone’s money. But one sector of the economy which has been doing well is the markets with higher earnings recorded in recent times.

PGM and gold mineral player Sibanye Stillwater reported headline earnings down 51% for the six months ended June 2022, partly due to the 3-month gold strike as well as operational difficulties in the United States.

Despite that, it still declared a dividend of R1.38 per share for shareholders which is up 40% from the year before.

Coal player, Thungela Resources, which only unbundled out of Anglo American last year recently declared that it would give shareholders a massive half-year dividend income of R60 a share.

Acting Chief Investment Officer: ABSA Stockbrokers & Portfolio Management, Ricardo Smith, says investors are seeing decent pay-out ratios from equities.

“It is also quite good for investors and this is part of the reason why we actually advocate for not only having your pension fund investments but also having your discretionary investments as well as other pools of investments, including some of your emergency savings,” says Smith.

Having access to these types of additional income streams is believed to have greatly assisted those privileged enough to be invested in the financial markets amid a situation where one’s regular income has lost value due to inflation.

Investors to remain focused 

While this is a positive benefit in times like these, the advice remains that discretionary investors must remember their long-term financial goals, which would likely include a combination of capital growth, capital preservation as well as income generation.

“Quite a lot of return from equity markets often does come not only from the capital appreciation, but from that re-investment of dividends, so it’s important for consumers and investors to stay the course, stay the objective, but certainly from a financial squeezing perspective, it is good to see these dividends,” concludes Smith.

Fund managers often say that it’s better to be invested in capital markets for the long haul and not to be obsessed with seeking out short-term profits as these are not usually sustainable, but if invested in solid companies that generally pay out decent dividends on a bi-annual basis, this can go a long way in helping to navigate tighter financial times like these.