Daniel Kibel, Founder of CM Trading, shares his insights on what the investment landscape has revealed in 2020 – “The Year Unexpected”.
“When it comes to global markets throwing out curve-balls to investors, 2020 has just lobbed out one spinner after the other. The corona-virus pandemic swept the globe, halting trade for many companies without warning and throwing markets into disarray. And it all happened so fast. 2020 has been The Year Unexpected. But in some ways, we are finding our way back to some semblance of normal.
“The investment landscape has changed considerably since the last trends article we shared in December, when there was already a growing degree of wariness in investing in South African stocks. Local stocks are a reflection of what’s happening in the economy – as is, of course, the case with any economy. And the South African economic landscape is far worse off, having already been in trouble before COVID.
“COVID has exasperated all the issues that were there before and brought a few new ones along with it. With that in mind, investing in South African stocks right now is not the safest option. That doesn’t necessarily mean that it’s completely the wrong thing to do. But there is great risk. People looking to make a lot of money with very high risk investments may want to do it. But it’s a far safer option to look abroad for stability – like with major stocks (Google, Amazon, Tesla etc), which are doing very well right now.
“In a global economy that is on a downturn, investing abroad is the only reliable option at present. Most investors are looking for a relatively stable bet when they put their money down. Risk-free investment is a unicorn, because, of course, “stable” doesn’t necessarily mean that there’s no risk. There is some risk attached to every investment. And it’s critical that everyone understands that. But there is far less risk in investing abroad – particularly in The Year Unexpected.
“When markets are on a downturn, you need to be savvy about what you’re investing in. It’s either super high-risk with potentially super high returns; or stability with slower, steadier yield. Think very carefully about how strong your appetite for risk actually is before making any spur-of-the-moment decisions.“In terms of trading, we are still seeing a lot of high-risk but potentially high-return investment opportunities. But it’s not quite where it was in April and May. Then, across the board, we were seeing extremes – with people either making fortunes or losing fortunes in the blink of an eye. Now, the international markets, for the most part, have stabilised somewhat. And a few major stocks in the United States have soared – as mentioned earlier – like Amazon, Tesla and Google.
“Gold is at an all-time high – at almost 1950,00 – and a lot of investors have made a big profit on the precious metal. If you’re looking for a standout investment, gold is it. It’s a bit baffling, but all the indexes are up at the moment, too, despite the current circumstances.
“Though I don’t like sounding like the voice of doom; unfortunately, the outlook for South Africa is a bit grim at this stage. The economy was in crisis pre-COVID and will be even more so post-COVID. Unemployment numbers are massive, and the electricity and corruption issues are major problems that have to be addressed, among other things. So, it’s going to be a long, hard road back after this.
“Investors are likely to be hesitant to invest in South Africa for a while. Post-COVID, it’s just not going to be an attractive prospect for regular investors. But this was already the case, to an extent, before the pandemic hit.
“That said, the entrepreneurial spirit is strong here, and South Africans have always remained resourceful. There is a big desire among South Africa’s people to do well. So, there is always hope. And ultimately, hope is what drives people to invest.
“The beauty of investing – particularly with online trading – is that you can make money when things go up or when they go down. There is always opportunity in the marketplace – no matter how good or bad the global situation may be. So, keep looking out for opportunity, because it is everywhere, and never let go of that hope – even when the unexpected happens.