27four Style Analysis – Quarterly Note September 2022

Local and global equity markets have been on tenterhooks with investors having the same reaction each month 1) Bad news = sell 2) Oversold and smidge of positive news = lets buy-in 3) bit more bad news = erase rebound profits. The result is significantly increased volatility with both the SAVI and VIX touching highs last seen during the COVID sell-off. The impact on style performance on the JSE is both consistent and logical, with a few idiosyncrasies. There has been a flight to quality which has manifested in quality, dividend yield and large caps providing relative outperformance. Interestingly, dividend yield has been the most robust (by a country mile) which we attribute to its relatively lower duration risk. Simply, if shares are treated like bonds (i.e. loans) high dividend yield shares give funders their money back faster. Since ‘yield curves’ (discount rates for shares) have increased, the market is favouring low duration strategies. If the uncertainty continues, high dividend yield strategies should continue to outperform, yet if positive sentiment increases, value will probably make a Rocky Balboa-esqe comeback but no-one knows if and when that will happen.