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Equities and the changing moods of "Mr Market"
By Grant Watson
One of the defining features of markets is change. As Benjamin Graham in the investment classic The Intelligent Investor said, the mood of “Mr Market” is prone to temperamental swings. These moods may range from a “risk on” to a “risk off” environment and may swing from a currency-weakening environment to a currency-strengthening environment. Each of these environments or moods represent distinct periods that can have significant impacts on equities and their related performance. It is therefore advantageous to understand how, over meaningful periods of time, an investment strategy that underlies an equity fund performs under different market conditions or moods. The article below contrasts the performance of the (ASISA) South African EQ General Peer Group Median within the unit trust sector versus the Old Mutual Managed Alpha Equity Fund over the decade to 31 May 2017 under 6 distinct market environments measured monthly. The (ASISA) South African EQ General Peer Group Median may be viewed as a proxy for the average general equity strategy.