It may appear crass that the likely imminent passing of Madiba is viewed with an eye to possible investment outcomes but in death, as in life, this great man will surely affect us all.

There is no doubt that today we enjoy the legacy of Nelson Mandela’s vision and leadership. Yet the question remains; will the market seriously crash when “it” happens?

To us the answer is: no. A limited kneejerk sell-off is likely but we think the market has already priced the event itself in. More important will be global investors’ perceptions of how we deal with any immediate unrest (which seems unlikely) and, in the longer term, how true we are to Madiba’s principles of freedom and opportunity for all.

The importance of overseas investors – and specifically of the giant pension and “macro” hedge funds that trawl the globe seeking yield – cannot be overstated. These are big beasts whose sheer scale can influence prices and sentiment on their own, when the Buy or Sell buttons are pushed. They tend to move with the herd and, like most herds, they can scare easily. The Marikanas of the world scare them. So too do poor governance and corruption.

Local shares have had a great bull run over the last decade and the last three years in particular. Global investors have bought in big and pushed prices up. It’s certainly not clear that the underlying earnings of local companies have increased at quite the same rate though, so are current prices justified? Recent market volatility could suggest that question is not being answered satisfactorily. Given the weakening of the Rand and the growing attractiveness of developed markets it may be that we are in for a period of lower returns in the local share market.

We say: SA shares look slightly over-valued anyway with the All-Share Index at or near 40,000 – regardless of the “Madiba Effect”. Don’t be scared to lock in some gains and look at cash or income funds as options in the short term whilst waiting to see which way this market is really going.

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Michael Furter is a Director at Consequence Private Wealth www.consequence.co.za

The above should not be construed as financial advice without seeking further advice from us or your own financial advisor.

Please contact us at info@consequence.co.za before making any investment decisions.