Mark Wilkes, VP of Risk at Easy Equities, has deep experience in global investment markets having operating trading desks at major institutions in London, Amsterdam and Johannesburg. His advice now to the hundreds of thousands of Easy’s retail investors who own US shares is to be cautious: keep faith with your own processes but despite the excitement of the last month, stay conservative. He reckons it’s best right now for investors to stick with broad based ETFs like those tracking the S&P 500 Index rather than buying into individual shares. The market veteran shared his insights with Alec Hogg of BizNews.
Mark Wilkes on how he helps EasyEquities and the clients reduce their risk and what the US markets are going to be doing in 2023
I think to a certain degree, our main kind of impetus in market risk is to ensure that the client’s desires and wishes in terms of picking up and occasionally kind of seeing these counsellors is enabled in a seamless and fair way, you know, which benefits the clients. And to the optimal framework possible which also doesn’t put the shareholders of the public sector at risk in terms of execution. That’s kind of like the main kind of remit. So a smooth, seamless kind of set-up. We trade the clients continuously in and out of the shares, to their wishes. In terms of the general kind of approach to market risk and portfolio risk net clients have, again, it’s a difficult one with the particular shares that we’ve indicated as being the kind of larger traded shares. You can see the kind of phenomena which extends out to broad international markets that are participating in the US, the kind of fang share kind of attachments as such. So there has been a lot of interest in stocks as extraordinary as Tesla. I mean, the ride of Tesla has been absolutely extraordinary and continues to be so. And yet the clients embrace this kind of foresight. They’re being offered a call well, by Mr. Musk probably the best way to put it, and a kind of going along with the ride in the journey and that has been quite at times quite rewarding for them. So yes, kind of presenting, you know, air information that’s not f advice and ensuring that the clients are getting a fair crack of the transaction, which is what we’re really after. You know, the rest is largely at the behest of the client and the decisions are generally making a modest sum, how shall I put it? crowd or herd, as one would expect.
On how US equities performed in the first month of 2023
Well, look, I mean, it’s been quite a rally, I suppose. I mean, last year was a pretty heavy kind of decline. S&P down about 20%, but we’ve had about a 6% rally so far within the markets. Tech, again, much more volatile. NASDAQ down about 30%, 33% last year rallied about ten or 11. These stocks, you know, that we were talking about largely kind of participate within that kind of zone. So we’re dealing with a situation where stocks were quite steadily kind of marked down towards the end of last year and somewhat of a rally at a key moment, I think, in time even as we speak, you know, with the direction largely up in the air, I suppose.
On whether it’s a good time for investors to be buying US stocks
Sometimes the rand can be the making or the breaking of an offshore investment. So the first thing is to kind of formulate for an individual, is whether, you know, no matter how much money you’re investing, whether first of all, the dollar is where you want to be in relation to rand. And we know that also becomes a little bit problematic, we can kind of see what direction and we know the structure issues that we have at home here. So that’s kind of like the first component before you even get to electing, you know, which US stock you want to buy. So in terms of the US market, it really is again, like all roads kind of lead to Rome for this week, isn’t it? We’re going to get direction out of that, which is going to really indicate whether I think perhaps individuals should be more value or growth orientated in terms of stock selection.
It’s a case of, I think, the private or the kind of normal clients is kind of going to be embedded in the narrative or narrative of some sort, you either accept the narrative that the market is feeding and or you reject it and take another opinion. I think you have to be very careful about which sectors that you choose to invest in. This year we’ve had more or less the sectors which performed fairly well last year. We’ve had the opposite kind of scenario. So selection is going to be the key thing. Now, how a client selects, you know, the kind of investments that they should look at again, depends on what we’re looking at with this kind of inflation scenario.. Should you move more towards utilities, should you move more towards tech and growth? I would tend to stray on the side of taking in this kind of period where it’s hard to determine what’s happening straight on the side of taking an ETF, stateside ETFs, which may be invested in broader indices. Yes, S&P is coming down. It has come down quite a way from where we are. I think it’s about 11 spots, seven, seven, 12, something like that at the moment.
A bit of the heat has been taken out of the market because of last year. So if you go in and you buy in an S&P ETF, you’re buying it a third of the way through the decline of last year, you’re kind of an investable portfolio as of second quarter 2021. So I say, that’s quite a compelling argument to make on that side of things. And the S&P is always going to be beating out and producing the best possible stocks as part of the portfolio. So that part of the equation of balancing is taken out of mind – and that’s a fairly conservative way of playing it.
Notes from Interview
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