Where should investors be looking when markets feel this noisy?

Anthea Gardner, founder and CEO of Cartesian Capital, joined EasyEquities to share where her team currently sees value. Her answer covered South African shares, banks, bonds, cash, listed property and gold, but the more useful part was how Cartesian decides where the risk is worth taking.

How Cartesian decides where to invest

Cartesian watches markets every day, from company results and inflation data to politics and interest-rate decisions. Its Strategic Asset Allocation Report takes a longer view, usually six to 12 months.

The team asks a few practical questions: Which assets are attractively priced? What could improve their outlook? And are investors being paid enough for the risks involved?

During recent geopolitical volatility, Cartesian delayed finalising its view because conditions were changing too quickly. Sometimes waiting for better information is part of the investment process.

The JSE shares that are starting to look interesting

Cartesian sees value in selected JSE-listed companies, particularly banks, industrial businesses, defensive shares and listed property.

Anthea also cleared up a common misunderstanding. A low share price does not necessarily make a share cheap. A R10 share can be expensive, while a R1,000 share can offer good value. What matters is the price relative to the company’s earnings, assets and prospects.

Fractional investing means investors can still access higher-priced companies without buying a full share.

Cartesian is looking for established businesses with good management, sound operations and a reason for the market to see them differently in future. A low valuation may catch the eye, but a clear catalyst strengthens the case.

Why South African banks are back in focus 

South African banks are among Cartesian’s strongest current ideas. The large banks have scale, established customers and years of experience managing difficult economic cycles.

Cartesian currently holds Standard Bank and FirstRand. Standard Bank’s reach across Africa gives it access to earnings beyond South Africa, while FirstRand remains one of the team’s preferred operators.

Nedbank and Absa also appear inexpensive, although Cartesian wants to see a clearer reason for their valuations to improve. A company can remain cheap for a long time. Investors need to ask what may change.

Cash is earning its keep again 

At current yields, cash can play an active role in a portfolio.

Anthea was referring to money market funds and similar low-volatility investments. They can earn a return while keeping money accessible, giving investors the option to buy when better opportunities appear.

This can be especially useful during a sell-off. Investors with accessible capital can act without selling another investment at the wrong time.

Cash is unlikely to provide the same long-term growth as equities, and inflation still matters. Its value lies in stability, access and flexibility.

Why shorter-dated bonds look attractive

Cartesian is positive about South African government bonds, particularly shorter-dated ones.

Buying a government bond means lending money to the state in exchange for interest. Cartesian believes shorter maturities currently offer attractive income without requiring investors to commit their money for decades.

The important measure is the real return, which is what remains after inflation. If an investment earns 8% while inflation is 3%, the approximate real return is 5% before tax and fees.

That is the figure that tells investors whether their purchasing power is growing.

Why lower rates could help listed property

Property companies often borrow money to buy, develop and maintain their assets. When interest rates rise, debt becomes more expensive and profits can come under pressure.

Lower rates can improve the outlook for stronger property businesses by reducing financing costs and supporting earnings and dividends.

Cartesian is watching retail property, logistics and companies exposed to township shopping centres, including businesses such as Vukile and Spear.

Interest rates are only one part of the decision. Occupancy, tenant quality, rental growth, debt and management still determine whether a property company deserves attention.

Why corporate credit is less appealing

Corporate credit is debt issued by companies. Cartesian is cautious because strong demand has pushed yields lower, reducing the additional return available for taking company-specific risk.

The comparison is practical. When a corporate bond pays only slightly more than a government bond or money market fund, the extra risk may not be worth it.

Even a strong company can issue a bond at an unattractive price.

Why Cartesian is cautious on gold

Cartesian remains positive about gold over the long term, but Anthea expects possible weakness in the shorter term.

Gold is often used as protection during war, inflation and market stress. During recent volatility, it did not behave as Cartesian expected, making it a less effective hedge.

Gold mining shares need separate consideration. Their returns depend on the gold price, but also on production costs, mine quality, management and operational risk. A rising gold price can increase profits quickly for a low-cost producer. That same effect works in reverse when prices fall.

Buying gold and buying a gold miner are related decisions, but they carry different risks.

Risk looks different when you know when you need the money 

Anthea drew a useful distinction between being risk averse and being risk aware.

For many investors, risk is needing the money when markets are down. Someone saving for a house deposit in two years should approach volatility differently from someone investing for retirement over 20 years.

Before investing, it helps to ask:

• When might I need this money?
• How would I react if the investment fell sharply?
• Am I relying too heavily on one company or asset class?
• Is the expected return worth the volatility?

Avoiding all market movement can create another problem. A portfolio that grows too slowly may fail to keep pace with inflation or support a long retirement.

How the Cartesian Balanced AMETF works

The Cartesian Balanced Actively Managed Exchange-Traded Fund combines several asset classes in one JSE-listed investment.

It can hold up to 75% in equities, with the rest spread across bonds, cash, property, commodities and offshore assets. This gives the team room to change the mix as opportunities shift.

Anthea also questioned the assumption that people approaching retirement should automatically move almost everything into low-risk investments. Someone retiring at 60 may still need their money to grow for another 20 or 30 years.

The right balance depends on when the money will be needed, how much income it must provide and how much market movement the investor can tolerate.

Why South Africa may be earlier in the story than investors think 

Cartesian believes parts of the South African market already offer attractive value.

A future improvement in the country’s credit rating could increase international demand for local bonds and shares. The timing is uncertain and will depend on economic growth, government finances, policy delivery and political stability.

Investors do not need to agree with every market view Anthea shared. The practical lesson is to ask better questions: What am I being paid? What could go wrong? What might change the investment case? And how does this fit with everything else I own?

Market forecasts change. A useful way of thinking travels further.

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