under 14% per annum. If this is the case, then we are due for a period of pay-back or mean reversion.
However, in the recent Bull and Bear report released by Glacier, almost 60% of the fund managers surveyed thought that the market was fairly valued (40% believe that it is overvalued) but they all expect it to deliver nominal returns of between 9% and 13% in 2014.
We know that fund managers can and do get it wrong, but if they are correct and the market is not hugely overvalued, perhaps it is telling us something else? Perhaps it is telling us that the CPI number is not correct? If we know that equities should give real returns of around 7%-9% per annum, then perhaps the market is telling us that inf lation is closer to 10% and not the 6% Government wants us to believe. The recent round of wage negotiations and salary increases suggest that most of our working population don’t believe the 5.4% figure. Petrol and electricity increases seem to support a different number too and I know that 10% is certainly far closer to my reality.
Gregg Sneddon is a certified financial planner with thefinancialcoach.co.za in Cape Town.