For the last few days financial markets around the world have taken a massive beating, and this has affected investment portfolios severely. Some investment gurus are calling it the end of a very long bull run while others are calling it a technical correction.
Whilst global economic growth remains strong and global unemployment remains low, the markets fear that global central banks will raise interest rates too quickly resulting in a recession. Conversely, not raising interest rates enough might allow inflation to become entrenched.
During 2022, market sentiment was negatively impacted by events such as the war in the Ukraine, Covid, higher inflation and interest rates. Global equities fell by 15% year to date ending May 2022. SA asset classes were more resilient due to higher commodity prices. Although growth assets such as equity and property underperformed during 2022, these asset classes are required to outperform money market funds over the long term as illustrated in the table below.
Even after increasing interest rates by 0.75%, the United States (US) Federal Reserve (Fed) still believes that it is possible for the central bank to achieve a soft landing in which they can tame inflation without pushing the economy into a recession. Consumers, however, seem to disagree, and this is in line with economic data showing the worst reading of consumer confidence since the 1970s.
The rand has remained resilient, albeit volatile, as negative global drivers continue to clash against many positive local drivers. At one point, the rand touched R15.18 last week, before poor performing global indicators caused the rand to depreciate back to levels around R15.90.
It has been almost three decades since the African National Congress (ANC) came into power. Our job, as economists, is to interpret the economic results of their actions, or, in this case, the lack thereof. To do this, we try to determine how the decisions of the ruling party, in aggregate, impact on the economy and, by implication, on the livelihoods of South Africans.
Elevated levels of inflation and higher interest rates recently spooked the financial markets while the world watched with bated breath as Russia invaded Ukraine. These are two of the many factors that are currently affecting the global economy and markets.
Most South African investors know that they need to include global exposure in their portfolios, and that they should increase their exposure if they already have it. There are, however, many considerations, such as different asset classes and available investment options.
How do you create wealth? It’s not a new question and still it remains complex, even for people in the financial industry. As global investment specialists, we assist entrepreneurs in making better asset allocation decisions about their estates. Our job is to grow wealth and to protect it.
Until the early 2010s, South African investors had a strong bias towards investing in local markets. Offshore markets were generally perceived to be too far away and too inaccessible to consider.
