Markets bet on recovery in 2021
Last Tuesday, I took a call from my good friend, Ronnie, whose equity portfolio I manage.
It was the first day of December, and the media was describing November 2020 as a record month for global stock markets. The S&P500, a measure of United States (US) equity markets, had climbed a staggering 11%, supported by news that an effective COVID-19 vaccine would be available before the end of the year, that a Joe Biden presidency would repair America’s battered international image, and that the leading nations would continue to sustain an ailing world economy.
“Did you catch the bounce?” was Ronnie’s only concern. “Were we fully invested, huh?”
Ronnie had worked hard his whole life and was very well-off. But he was a born worrier. He would openly confess that if he had nothing to worry about, he couldn’t sleep at night.
I shook my head, bemused, and laughed out aloud. “Ronnie, back in March [when the stock market plunged dramatically], you phoned me in a total panic, insisting I build a cash buffer against further losses. Get out, if you must, you urged me. Now you are asking me if I ignored your hysteria, stayed fully invested, and rode the recovery?”
Ronnie’s mania bears testimony to the extraordinary emotional buffeting we weathered over the past eight months. When news of the deadly virus first broke, we were consumed by fear and uncertainty, troubled not only about our health but also about our financial well-being. We were shaken to the core.
Yet, as the medical profession developed a better understanding of the virus and modified its treatments accordingly, and as the scientists made progress in creating vaccines, society gradually regained its confidence and adapted its lifestyle to new conventions, sanitising hands and wearing masks in public places and contacting friends and families on video rather than in person. People have slowly returned to shops and restaurants, keeping their social distance and not lingering unnecessarily.
The advances mitigating the virus and the wide distribution of vaccines projected in 2021 are guaranteed to make next year more prosperous than 2020. The global economy will recover from the steep decline suffered in the first half of 2020, when governments around the world imposed far-reaching lockdown measures, bringing international trade and industry to a near standstill. The extent of the recovery we expect is difficult to calibrate, particularly against the recurring outbreaks of the virus in the US, United Kingdom, and Europe, although the consensus among leading investment houses suggests that global economic output and corporate earnings will reach pre-pandemic levels by the end of 2021.
These forecasts take for granted ongoing fiscal and monetary measures from governments and central banks designed to bridge the loss in income and revenue inflicted on households and businesses by the closure of the world economy in 2020. And until the world’s largest economies have fully recovered from the financial and psychological devastation caused by the virus, additional stimulus packages will follow. A precondition of these remedial actions is that interest rates will remain low for a very long time. With interest rates at rock bottom, equities will continue to outperform other asset classes like credit, bonds, and property. This isn’t good news for investors seeking yield who might have to modify their income targets, substituting capital gains for interest
We should also not underestimate the role of the outcome of the American election on a rebound in the world economy. A Biden victory has raised hopes that, in the absence of troublesome Trump tweets, trade and commerce between the US and its allies will thrive. Popular appointments to Biden’s cabinet, too, have added to the positive sentiment surrounding his victory.
There are many companies whose services helped us cope with the challenging times experienced over the past eight months, businesses such as Zoom, Amazon, Netflix, Google, Facebook, and Uber Eats, and the question is whether these firms will continue to prosper when life returns to normal after the pandemic is beaten. In addition, investors ask, will those businesses that were wrecked by the lockdown – hotels, restaurants, theatres, shopping malls – recover speedily, or will the change in attitudes and habits encountered during lockdown leave a permanent incision on our lives?
Patterns about the future shape of our lives are clearly emerging, from families requiring more space for stay-at-home work to increased outlays on upgrading residences and purchasing more powerful computers. Moving to the suburbs has driven a demand for privately owned motor vehicles, while seeking the companionship and joy of four-legged friends has led to a boom in pet food. Home fitness programmes are flourishing, athleisure has replaced formal office wear, and exposing your face on Zoom has sustained the demand for face cream and makeup.
Other developments and changes we have embraced, such as signing documents digitally, ordering home delivery from restaurants and shopping online, will stay with us well after the pandemic is over.
The rise in share prices that has pushed global equity indices to record peaks during 2020 have been the “virus winners” – the big technology giants that helped us keep our sanity during lockdown. Their dominance in the markets in which they operate and their policy of using their vast profits to seek new avenues of growth will underpin further gains in 2021 and beyond. But as infection rates in the world diminish and the global economy renews itself, “vaccine beneficiaries” – hospitality, leisure, financials, energy, and metals – will broaden the market’s opportunities and appeal. Whatever, we are safely positioned for another good year in stock markets.
I ended my call with Ronnie, assuring him affably that during our long and established relationship, we had learnt to navigate his impulsive outbursts. As I explained at the time, the one thing I had learnt over many years on the stock exchange was that after every major disturbance, no matter how severe, the stock market soon recovered – some a little sooner than others. It happened after 1969, 1987, 2000, and 2009 – and 2020 didn’t disappoint!
- David Shapiro is a veteran stockbroker, market commentator, and former deputy chairman at Sasfin Securities.
The variant that scuppered our new-year hopes
Since its arrival, COVID-19 has challenged physicians to gather evidence and make firm decisions. This isn’t a behaviour to which good evidence-based doctors are accustomed.
A fair, scientific development of a pathway of care is usually the exploration of an idea, an attempt to falsify it, and only when it proves reasonable, recommending it.
When the National Institute for Communicable Diseases announced a new variant of the SARS-COV-2 virus on the shores of South Africa that had three mutations in its spike proteins that could possible lead to a different disease picture for our population, I took the position of simply raising an eyebrow. This meant that I noted the transparent efforts of the South African government in contributing to international knowledge, and I labelled this finding in my mind as probably not significant. Many of my colleagues adopted the same approach.
Viruses mutate. The SARS-COV-2 virus had shown little mutation since its appearance, and a mutation such as this seemed inevitable.
Furthermore, mutations in viruses often result in the weakening of their clinical picture. We all remember how every case of swine flu required admission in 2010. Now, swine flu is largely defeated at home. Indeed, this new variant may have been good news. This was perhaps finally a COVID-19 natural evolution in a positive direction.
The predictions I made were wrong. A month later, this new variant has shaken our world. I field calls daily of young, healthy individuals who seek my advice regarding the “summer flu” they have contracted.
Most of these callers are either intrigued or adamantly object when I suggest that their rather typical COVID-19 symptoms of headache, sore throat, and either diarrhoea or sinus pain could in fact be COVID-19. Interestingly, the denialism is often fuelled by the fair logic that since they have followed the rules of social distancing, mask wearing, and sanitising, how could it be possible that they contracted COVID-19?
After some convincing, I manage to send them off for a PCR test, and perhaps 20% to 30% of these patients’ swabs are coming back positive.
Professor Salim Abdool Karim, the chairperson of the government’s Ministerial Advisory Committee on COVID-19, cited this week that a working group had demonstrated over a sample of 100 000 cases that the new variant (officially named 501Y.V2) is 50% more transmissible than last year’s variant.
It explains why so many more patients are accessing their doctors and testing positive now. Eighty percent of analysed new cases in hotspot areas are indeed the new variant. We can blame Rage and irresponsible behaviour for this devastating second wave in South Africa, but the reality is that this variant should share part of the responsibility.
This has been a difficulty week in our practice, and we aren’t alone. Every day or two, a patient of the practice or a patient related to a patient of the practice has succumbed to this dreadful virus.
We have admitted a patient to hospital for high-flow oxygen and intravenous steroids almost every day. Doctors are trained to be saviours, and it feels disempowering so often to have to shift into the role of empathy only because all other options are exhausted.
I’m encouraged, however, by more community members becoming more cautious with regards to the virus. Fear drives caution, and caution saves lives. So, fear has been positive.
I’m also encouraged by the countering statistics reported by Dr Mary-Ann Davies from the department of health, Western Cape, where the probability of death over a 30-day period was compared between the two waves. The study concluded that there was “no difference in mortality by age group between the waves”. This reliable evidence seems contrary to what we have experienced on the ground, but it’s worth noting as a beacon of hope.
The tentacles of the spikes of this variant have reached further than expected – into our schools, shuls, and places of work. We all realise that hope for a new reality as we began 2021 was a pipe dream.
I don’t think anyone predicted the level of restriction COVID-19 has re-imposed upon us. I have been flooded with the question, “Should my kids be going to school orientations and younger kids back to pre-school?” We learnt last year that with the correct controls, schools aren’t cesspools of COVID-19 spread. In fact, they are probably the safest place for our kids to be. Nevertheless, I have adopted the position that over this brief spike, other than short safe orientation days where I believe guards are up and the probability of lax behaviour is low, we shouldn’t be sending our kids back to school yet.
I’m aware of the tremendous strain that home schooling is placing on families – emotionally, financially, and logistically. However, after a long meeting with a group of academic doctors who advise one of the community schools, I agreed that it made no sense to send young children to school. Unfortunately, they are poor adherers to social distancing and scrupulous behaviour, so it isn’t wise to go back to school in the face of a more contagious variant when hospitals are near capacity and ventilators are unavailable.
The value we give to life – even one life – overpowers the tremendous inconvenience we are experiencing. The status quo isn’t a long-term solution. As soon as health facilities are coping well again, I believe children should return to school with safety measures in place.
The second wave in South Africa has been devastating for so many in our community. Now is the opportunity for each of us to reach out in support of those personally infected and affected.
Let’s take this variant as a cue to a better type of approach and formidably march forward in our determination to overcome this pandemic and get ourselves back to normal life. I look forward to “variants” of novel treatments, newer and more efficient screenings, even vaccines.
- Dr Daniel Israel is a family practitioner in Johannesburg.
Towards some form of normality
When the text message popped up on my phone at the end of December, I gave a huge sigh of relief. The message was from my medical-aid confirming that I was booked for the first of two COVID-19 vaccinations in two days’ time.
It had taken some time to get through to the overloaded phone lines to make the booking. The announcement by the government that the first batch of Pfizer vaccines had arrived in Israel triggered a rush by many to be first in line.
I finally reached an operator who took my ID number. She agreed that I qualified as an over 65-year-old, and with calm efficiency, offered me an appointment within 48 hours at 19:25, which was immediately confirmed by that text message. The process was, to my delight, actually working. My wife and I were among the first tranche of the Israeli population to “qualify” for vaccinations as most of the seriously ill cases and deaths had occurred in our age group.
With many swirling thoughts in my mind about events during 2020, the initial confusion, fear of the unknown, and the isolation from two full lockdowns spanning nearly four months, I was now focused on the forthcoming appointment and the first sign of hope that we might be at the beginning of the end of a traumatic year.
We drove through the eerily quiet streets to the vaccination centre, and arrived well in time. It was set up in a deserted shopping mall with seating spread out to observe social distancing protocols and a couple of desks to register those with bookings. We were quickly accepted and given a printed number and then sat to watch on large screens as the numbers and nurse locations were called. Within five minutes, our numbers came up and we were ushered into the premises of what was probably a converted shop with several cubicles. Our nurse, Hana, was chirpy even after a long day at her station and after a few clicks on her laptop to check our records, we received our jabs and were told to wait 15 minutes to ensure that there were no untoward side effects.
I looked around at the people before and after their injections, all sitting dutifully and quietly with their masks on, glued to their smartphones – typical of most Israelis – and wondered what each of their stories could tell. When was the last time they saw or hugged their grandchildren? How were elderly singles dealing with the isolation and loneliness? How were they managing financially?
The whole process took less than 30 minutes, and we were in the car headed back home. Both of us had absolutely no side effects from the jabs, but we did feel a mixture of pride in our health system and pleased at how efficient and quick the process had been.
Mainly I felt as if a large weight had been removed from my shoulders, and life felt a whole lot more positive. That was on the micro level, but on the macro level, the reality of course, looking at the steep rise in infections and serious cases of COVID-19 around the country, was very different.
As I write these words and two days before my second, “top-up” vaccination, the country is in its third lockdown. On the one hand, more than two million people have received their first dose of the vaccine but on the other, the daily infection rates and the number of seriously ill and dead are at record levels.
Israel has been vaccinating more than 150 000 people a day, but on 17 January, more than 4 000 deaths were reported since the start of the pandemic, which is a low percentage by world standards but for a small country of 8.5 million, it was still a grim milestone.
There is new uncertainty about the efficacy of the vaccinations against the various mutations that have arrived in Israel from South Africa, Britain, and possibly Brazil. I’m concerned that some people in Israel remain resistant to the very idea of being vaccinated at all, based on everything from conspiracy theories to just blind ignorance.
Copious articles have been written and spoken about in the Israeli media referring to the “zig-zag” of government policy in handling the COVID-19 pandemic. The country is amidst its fourth election campaign in two years, and many have referred to the government’s policy in handling COVID-19 as tainted in many cases by political expediency.
Much finger-pointing has been done at the ultra-Orthodox and Arab communities, who have openly ignored many of the lockdown regulations, questioning why the government has chosen to treat them with kid gloves. Why weren’t our airports controlled more assertively? Why weren’t the tracking, tracing, epidemiological, and policing resources made more efficient to isolate people infected and needing quarantine, as well as deterrent fines implemented?
Why were all decisions regarding the education system made often literally the night before, leading to children being told that schools would be closed and they were to do distance learning from the following morning? These and many other questions are still to be answered, but the “bottom line”, as they say, is that Israel is making significant strides in immunising its population.
Prime Minister Benjamin Netanyahu has said that all Israelis above the age of 16 will be vaccinated by the end of March, which puts the country in a much stronger position to start opening its economy. That timeline would probably make Israel the world’s first country to immunise most of its population from the pandemic.
In 10 days’ time, my wife and I will receive our official “green” vaccination certificates. We will be able to return to some level of normality, going to the theatre, restaurants, the beach, visit family and friends. While it will still require caution and social distancing as more data is collected on the vaccine’s ability to protect and avoid distribution of the virus, we will be projecting the clichéd “smile from ear to ear”.
It’s a bittersweet feeling at a personal level as we realise that so many around the world wait to receive their vaccinations. We look forward to the day when the vaccine is implemented globally so that we all will share a sense of security and well-being.
- Dave Bloom was born and grew up in Zimbabwe and made aliyah in 1973 with a Habonim Garin to Kibbutz Nir Eliyahu. He worked with Reuters for nearly 25 years and for the last 20 years has been a partner in a financial services software company as well as a personal historian – helping people to record their life stories.
Guinea pig with a life jacket
A year ago, we were holidaying in South Africa, visiting family and friends, and my late parents’ graves in the Pinelands Jewish Cemetery. We were also recapturing memories and enjoying the Cape Town beaches.
At the time, there was barely a mention of a mysterious disease in the Cape Times and just a few fleeting internet references to it. We did notice a proliferation of face masks at the airport when we left Johannesburg, although I thought nothing of it at the time. Who was to know…
Perhaps I’m a random sample of one, but as someone in his 70s, the thought of death is often close at hand, especially with the passing of close friends and contemporaries. This was so much more so this past free-floating, anxiety-filled year when a vicious, merciless, take-no-prisoners enemy has been on the loose worldwide. It has almost gone unchallenged, and leaves in its wake untold deaths, misery, and destruction. People’s livelihoods have been destroyed, and this has led to increasing poverty on an unimaginable scale.
As a former Capetonian, these past few weeks have been especially heart breaking, and my heart goes out to those families – many who I know well – who have suffered unbearable losses.
On a personal level, our three daughters and sons-in-laws’ businesses have been decimated, while my wife and I have barely seen our children and grandchildren this past year, and not hugged them at all.
The year 2020 resulted in us changing our lifestyle dramatically. For the past 20 years, I have become used to visiting the far corners of the world as a fundraiser. So, it has been a major adjustment to be home bound and pivot to Zoom for work, not being able to engage investors and donor prospects face to face.
We have been good citizens when it comes to wearing masks and social distancing, but we have been joined at the hip by fear, a constant presence.
We have managed on our daily walks around the neighbourhood to have quality downtime, with three lockdowns and a myriad of restrictions that included initially not walking more than 100m from our home. However, we have been virtual prisoners in our apartment, feeling at times isolated, and yearning for the company of our family, friends – and my colleagues at the water cooler.
Taking all this into account, and especially with the dramatic spike in daily infections, when the news came through that the vaccine was available, we saw it as a no brainer. We needed to arrange an immediate appointment with our Kupat Cholim (medical aid society) in Jerusalem for the vaccine.
My wife, a former nurse, was more sceptical than I was about venturing into the unknown and the possible risks of being a guinea pig, but I saw it as a life jacket, a saviour, a genuine light at the end of a murky and devious tunnel. So too did almost two million others over the past few weeks as we literally scrambled to be first in line.
We marvelled at the military style operation and efficiency of the nurses and doctors who were calm, sympathetic, and understanding. They were unfazed by all the people – who were surprisingly calm and patient – sitting a metre apart in the cavernous Israel Convention Center. They certainly inspired confidence in us in being among the first to take the plunge with their incredible competence and effective manner in dishing out the jabs.
We aren’t naïve and our spectacles aren’t rose-tinted. We know that even when we get our green passport indicating that we have had the vaccine, we aren’t yet off the hook from the virus. We still have to proceed with caution and vigilance, needing to continue wearing our masks and respecting personal space. However, we’ll do this with less fear and anxiety.
One thing I do know with certainty: we will definitely re-engage with our vaccinated friends. Besides being with our immediate family, this is what we crave the most. There is hope on the horizon.
What we have learnt from this year from hell is that we are more resilient than we sometimes think we are. We recognise that calling on all our reserves of self-discipline and foregoing immediate pleasures – as difficult as this may be – seems to be paying off.
Perhaps the most important thing we have learnt is that when the chips are down, we value and appreciate what’s truly important in our lives. That’s our family, our friends who have been there for us, and the quality of our personal relationships.
Finally, for us in Israel, we have nothing but admiration for our health system, for our first responders and fellow citizens. Our vaccination nation has been a wow factor, a source of great pride and inspiration. Israel at its best!
- Solly Kaplinski is the former principal of Herzlia School in Cape Town. He emigrated to Canada in 1993, made aliyah in 2000, and now lives in Jerusalem.
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