• By Isaac Ramputa, Executive Director at RisCura

Covid-19: A global reset with a generational impact.

Isaac Ramputa, Executive Director at RisCura, Glenn Silverman, CEO of GS Investments, Karl Leinberger, CIO at Coronation, Malungelo Zilimbola, CIO of Mazi Asset Management and Shane Watkins, CIO of All Weather Capital.

The local and global economic outlook is bleak, yet the same may not be true for markets. Investment firm RisCura recently hosted a webinar with leading investment specialists in order to get their views on Covid-19 and its impact on markets, the economy and society.

“The impact of Covid-19 will be with us for a long time, likely generations,” said keynote speaker Glenn Silverman, CEO of GS Investments and independent consultant to RisCura.

“Unemployment will rise globally and is unlikely to fully recover to the pre-crisis levels. We can expect a rise in nationalism and authoritarianism across the globe, together with a reversal of globalisation.

“Financial repression in various forms, including increased taxes, repressed interest rates and other increasingly creative measures will be implemented to service the flood of new debt, as central banks and governments release unprecedented fiscal and monetary stimulus packages. The numbers will be gargantuan.

“It’s likely to be a very bumpy road ahead, with much volatility. However, this volatility will also create opportunities for investors, with asset allocation, both strategic, and increasingly tactical, being ever more critical,” said Silverman.

Karl Leinberger, CIO at Coronation, said that the firm’s outlook is very negative on the SA economy, both short term and long term. Their portfolios are light on SA domestic businesses and have been since 2012. However, he said there was a big stock picking opportunity on the JSE.

“Most of those stock picks are good quality global companies that happen to be listed in SA,” he said.

He added that Coronation was now optimistic about global equities, in contrast to their view in 2019, when they considered global stocks expensive.

“We are right to be concerned about the short term, but we also need to keep our eye on the fact that there are some pretty astounding opportunities to buy some of the world’s great businesses today, that will be incredibly profitable in three to five years. We cannot lose sight of that as investors,” said Leinberger.

Malungelo Zilimbola, CIO of Mazi Asset Management, said they are seeing a lot of downside risk and are protecting portfolios accordingly. “We are looking for companies with strong balance sheets and high cash generation, along with those who may benefit from this environment, such as technology companies.”

“We believe it is critical that clients remain invested in the market, since equity is the only asset class where you can regain the losses. If you are invested in the money market, you are not going to catch up with the market when it recovers.”

Shane Watkins, CIO of All Weather Capital noted that some of SA’s “zombie” companies, such as SAA, Edcon, and Cell C, may finally succumb and this will allow the survivors in their respective sectors to benefit.

Impact on politics and policy

Despite dire economic outcomes, Watkins noted that there are some important positives emerging from the current environment.