Who knows?

On July 24, the JSE All Share stuck its nose above 30 000 points and after some turmoil, we woke up today with the JSE nearing this level again. So what are the factors influencing this volatility? It is the strength of the SA rand?I s China keeping commodity prices buoyant? Or is it that 2010 is around the corner with some R425 billion's worth of expenditure on infrastructure in the pipeline?

The question is: 'Is it sustainable?' The dilemma is whether it should influence investment decisions in the short term. Nobody really knows! However, to overcome this issue we at Silke Financial Services continue to use the unique concept of 'Time Diversification' to determine investment strategy going forward.

Research into the most appropriate unit trusts is an ongoing process at Silke Financial Services. Here are summaries of comments made by some of the top fund managers on current market conditions:

Allan Gray Equity Fund: "We continue to believe that the FTSE/JSE All Share Index currently offers much lower future return prospects and is unlikely to be immune to the increased volatility that inevitably comes from higher equity prices. Nonetheless, we remain confident of our ability to outperform the benchmark index and through our proprietary fundamental research continue to find investments that should generate attractive long-term returns for our investors."

Nedgroup Investments Rainmaker Fund: "Although the year-to-date performance has exceeded our expectations, and the market may have a healthy pull back in the next months, we are not concerned that the market has reached an over-valued level. This view is supported by our expectations for further strong growth in profits for the next two years in the companies we are invested in; and further growth in the South African economy."

PSG Tanzanite Flexible Fund: "We continuously consider the yields offered by various asset classes relative to each other. The fund currently holds both cash and equities, but no bonds. Though equity as an asset class currently seems relatively attractive compared to bonds, the true bargains need to be picked very carefully. Certain pockets of the JSE have mushroomed to such an extent that they now pose significant risk to investors. The Construction Index, for example, is currently on a very demanding 24 times earnings; with earnings currently at record levels in this historically cyclical industry. On the other hand, now is a lucrative time for listing a construction company (if you have one of those in your back pocket). The PSG Tanzanite Flexible Fund, however, still has a bag full of bargains - the valuations and prospects of which we find very favourable."

In reality, nobody knows what's going to happen in the markets in the short to medium term. So don't be fooled by the quick ‘sector' short term gains with your money. The table below clearly illustrates this point. For example, look at the 17.04% performance of the Old Mutual Gold Fund over the past 1 month period and compare this to the performance over 5 years - delivering a paltry 9.63% per annum.

Silke Financial Services has the skill and expertise to place your money in the most suited investments appropriate to your risk tolerance based on our time diversification strategy.

If you have any queries regarding the above commentary please contact us on 021 683 3380 or info@silke.co.za