CIO Memoportfolio insights

9 April 2021

The pendulum is swinging to a happy middle

In brief

  • In a sharp contrast, the first three months of the year have been a happy one compared to twelve months earlier, with Ghana able to report on some noteworthy, albeit cautious, milestones.
  • Among them the successfully adjudicated 2020 presidential election dispute by the Supreme Court of Ghana; implementing a successful vaccine rollout that remains on course; and to the elation of the school-going children, schools were once again opened, and students were able to return to in-person schooling and interaction with their classmates.
  • The upswing from gloom during this quarter fuelled investor optimism for the year, reinforced with the twin rally in local equities and bonds, creating excitement and expectation. Nevertheless, once again we must remain cautious, as this remarkable performance was achieved with little improvement in the real economy.
  • The local market is now approaching a midpoint where assets are reasonably priced, amid the current low-interest-rate trend across the globe.
  • As the local market eases towards a happy middle line, Ghana’s fiscal structure will have more influence on investor sentiments than monetary policies.
  • The first-quarter rally means that the risk-adjusted return of most local assets is closer to their equilibrium than six months ago. With bargains in the local market thin on the ground, the range of future paths remains limited.
  • Therefore, in view of the local currency remaining relatively unchanged for the year, implementing a passive-aggressive approach would make most sense for investors, adapting their portfolio strategy accordingly, dependent on prevailing market conditions.
  • Today’s Covid-19 world is more nuanced, fluid and unpredictable, and therefore requires flexible thinking and nimbleness of mind to navigate risk, while achieving the desired returns.