Notes From my Inbox

THE YEAR OF THE FIRE HORSE

2026 is the year of the Fire Horse in Chinese cosmology. The combination of the energetic and sociable horse with the unstable element of fire is seen to represent rapid change and momentum, but also potentially chaos and upheaval.

The Chinese zodiac, consisting of 12 animals and five elements, traces its origins back to a calendar system developed during the Shang dynasty more than 3 000 years ago. While the Western zodiac assigns its 12 identities to monthly periods, the 60 combinations in the Chinese system change only once a year. This divergence in cadence reflects the profound cultural differences between the two societies: the Western approach is linear, short-term and individualistic; Eastern cultures emphasise cyclicality, patience, and collectivism.

While most rational people view horoscopes as harmless superstitions, the cultural attitudes that they reveal are quite instructive from an investment perspective. The most obvious example is time horizon. The 12-month solar cycle aligns with investor emphasis on short-term performance – a focus on last year, this year, and the next. In many Eastern traditions, you only complete a full cycle at the age of 60. This fosters patience and an emphasis on multi-generational wealth creation, rather than constantly chasing the next big thing.

We think having this level of staying power provides a profound advantage. Every investor’s outcome is highly leveraged to both the rate of return achieved and the duration for which they remain invested. Figure 1 shows the maths of exponential growth. While we are wired to focus on the near term, the magic happens two or three decades in.

We have seen similar outcomes in our own funds. 2026 marks the 30th anniversary of the launch of our first two funds available to the broad investing public in 1996. Over this period, the Coronation Equity Fund multiplied its initial capital invested 63 times, resulting in almost double the end value produced by its average surviving peer*. The more conservative Balanced Plus Fund multiplied initial capital 46 times, resulting in 1.5 times more capital than its average surviving peers**.

Another interesting difference in mindsets relates to risk tolerance. More individualistic Westerners tend to have higher loss aversion, as a decline in portfolio value is seen as a personal catastrophe rather than a shared setback. More collectivist Eastern thinking tends to be risk-seeking, as communal orientation and extended, close-knit social networks act as a cushion that can be relied upon to provide support when things go wrong.

A final difference in biases relates to how time is viewed. While the Eastern cyclical approach conditions investors to expect a reversion to the mean, the more linear Western approach invites recency bias – the expectation that current trends are likely to continue.

THE INSATIABLE APPETITE FOR GOLD

South African assets enjoyed a spectacular year, delivering high absolute returns to investors. A surge in precious metal prices contributed significantly to this outcome, with soaring gold and platinum miners responsible for nearly 60% of the local equity market’s return in 2025. This run was so significant that gold now makes up 17% of the FTSE/JSE Capped All Share Index, up from around 7% in late 2021.

Our equity funds are currently underweight gold, and their short-term returns are therefore lagging the market. While we agree that there are good reasons underpinning the gold bull market – geopolitical instability, over-indebted sovereigns, and the debasement of the US dollar – we think we are in the late stages of a very extended market. The market currently prices the world’s gold stock as more valuable than the Magnificent Seven tech stocks, the entire London Stock Exchange, and all US farmland combined. Gold is now the single most crowded trade amongst fund managers. Commodity prices are cyclical, and after every previous gold rally, investors in the miners suffered significant losses as prices declined.

Only time will tell how the battle between the linear and the cyclical view plays out in this case. As long-term investors with a responsibility to prudently manage the retirement capital that you have entrusted to us, we are prepared to endure the short-term discomfort of not succumbing to the pressures of the moment, while remaining focused on avoiding the risk of steep losses when the cycle turns.

* Average of the ASISA SA – Equity – General; A-class performance
** Average of the ASISA SA – Multi-Asset - High Equity; A-class performance

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