Quarterly style analysis | March 2022

If COVID over the past 2 years wasn’t enough, the first quarter of 2022 has seen a major European conflict, skyrocketing US inflation as well as new lockdowns in China due to the fast-spreading Omicron variant. The above points have fuelled markets with a fair dose of fear and panic which has manifested in large volatile swings and April being a torrid month for the JSE. The results of the 2022Q1 style analysis indicate that value has maintained a strong trajectory, largely being buoyed by the additional demand side resource shocks brought on by the Russia/Ukraine conflict. More importantly, dividend yield has emerged as a central dominant style over the past quarter, especially in the upper market capitalization stratum of the JSE. The result is consistent with a flight to low duration, quality shares that can weather tempestuous markets. Without any clarity on peace talks, lockdown restriction easing and aggressive rate hiking cycle, high dividend yield counters seem to be a plausible buffer against risk-off sentiment. The ultimate question is ‘where to from here?’. The answer is anyone’s guess, yet we do attempt to provide some insight around possible future outcomes through our model driven views of style performance forecasts over the next quarter. For now, all we can do is hope and pray that ‘cool heads’ prevail on all fronts.