The fourth quarter of 2018 saw a turbulent and disappointing period of factor performances, where all six investment factors delivered negative return spreads. Earnings revisions led the way with an abysmal return spread (-13.5%), while Price Momentum continued to struggle (-7.1%). Interestingly, the cyclical Value factor of Price to Book faired best (-0.9%), while Return on Equity, Dividend Yield and Debt to Equity all fell over the last three months of 2018.
Key events that impacted performance in Q4 2018
While US tax cuts and strong economic growth provided a boost early in 2018, persistent concerns over global trade, higher US treasury yields and slowing economic growth (notably in the Eurozone) drove global stocks to their worst quarterly fall in seven years in Q4, as the MSCI World index fell 13.9% over the period. A large proportion of the quarter’s losses took place in December (the worst losses since 1970!) where global stocks fell 7.7%, reflecting increased risk aversion and volatility amid continued macro uncertainty. Locally, Q3 GDP growth bounced after a technical recession earlier in 2018, while Eskom revealed its balance sheet challenges, with maintenance failures resulting in renewed load-shedding.
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Satrix Managers (RF) (Pty) Ltd (Satrix) a registered and approved Manager in Collective Investment Schemes in Securities and an authorised financial services provider in terms of the FAIS. Collective investment schemes are generally medium- to long-term investments. Unit Trusts and ETFs the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETF, the participatory interest, while issued by the fund, comprises a listed security traded on the stock exchange. ETFs are index tracking funds, registered as a Collective Investment and can be traded by any stockbroker on the stock exchange or via Investment Plans and online trading platforms. ETFs may incur additional costs due to it being listed on the JSE. Past performance is not necessarily a guide to future performance and the value of investments / units may go up or down. A schedule of fees and charges, and maximum commissions are available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF Minimum Disclosure Document. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The index, the applicable tracking error and the portfolio performance relative to the index can be viewed on the ETF Minimum Disclosure Document and/or on the Satrix website. Performance is based on NAV to NAV calculations of the portfolio. Individual performance may differ to that of the portfolio as a result of initial fees, actual investment date, dividend withholding tax and income reinvestment date. The reinvestment of income is calculated based on actual distributed amount and factors such as payment date and reinvestment date must be considered. If the fund holds assets in foreign countries it could be exposed to the following risks regarding potential constraints on liquidity and the repatriation of funds: macro-economic, political, foreign exchange, tax, settlement and potential limitations on the availability of market information.
