An analysis of the performance of the JSE All-Share Index and S&P 500 shows that South Africans will benefit greatly by investing in US stocks.
Renowned investment specialist David Shapiro recently highlighted that people who invested in the JSE lost money this year.
“The JSE is down 4% year-to-date in rand terms. In USD, the JSE lost 14%. The S&P 500, in comparison, is up 10%. That is a 25% gap,” Shapiro said.
“You can kiss Putin’s ‘tochas’, bow and scrape to Xi, and invite Iran into BRICS, but just make sure your pension is invested in American stocks.”
Daily Investor’s analysis showed that the JSE All Share Index is down 5.7% year to date. The S&P 500, in comparison, provided a 10.5% return.
Taking the rand’s depreciation into account shows that the S&P 500 delivered a 23% return to South African investors in 2023.
The S&P 500, therefore, outperformed the JSE All-Share Index by 28.9% year-to-date when considering currency depreciation.
The underperformance of local stocks was caused by many factors, including load-shedding, slow economic growth, poor political decisions, and global events.
There has been a significant outflow from local equities and bonds from foreign investors who have lost faith in the South African economy.
South Africa’s junk credit status, paired with its recent Financial Action Task Force (FATF) greylisting, has accelerated this trend.
The South African Reserve Bank’s Monetary Policy Review revealed that the country experiencing investment outflows every year since 2017.
The Reserve Bank said South Africa experienced significant outflows from foreign investors in the first half of 2023.
The increase in outflows resulted in the rand reaching its lowest-ever exchange to the dollar of R19.80 on 25 May 2023.
It attributed the significant outflows to local structural economic issues and geopolitical tensions of the country’s own making.
JSE versus S&P 500 (in ZAR)
R1,000 invested in the JSE All-Share Index at the beginning of the year would have fallen to R943 in October.
In comparison, R1,000 invested in the S&P 500 at the beginning of the year would have grown to R1,232 in October.
JSE versus S&P 500 (in USD)
$1,000 invested in the JSE All-Share Index at the beginning of the year would have fallen to $845 in October.
$1,000 invested in the S&P 500 at the beginning of the year would have grown to $1,118.68 in October.