08 May 2015 Markets correcting!
The slide on world markets and the JSE caused another 3 stoplosses to trigger on Thursday in Anglos, Bidvest and Sanlam. On Wednesday Discovery and Mediclinic triggered stop-losses. The end result is that our iTrade Fantasy League portfolio is now in the red by R8,000, but nearly half of it is now in cash. Investing in shares is risky in the short run, but in the long run markets recover as long as you invest in quality companies, which we have. What triggered the slide?
Two things happened that brought the markets back, which on deeper analysis are not very serious. The US trade deficit soared, but it was mostly caused by an end to labour stoppage at ports. That meant that a lot of imported goods got shipped suddenly to domestic US. Secondly Yellen warned that Bond yields will increase a lot when interest rates start to rise and that equity market valuations were too high. That caused Bond yields to shoot up and the Dow declined. However, she did not say that interest rates will rise soon. Nothing new said.
Looking at the JSE All Share Index and the Dow charts below one can see that the JSE ran a bit ahead of the Dow. The JSE is up 8% from the beginning of the year and the Dow is flat. While the Dow stayed flat throughout April, the JSE spiked up. I think the JSE went too far too fast and is just correcting from too much exuberance.