In­fla­tion bo­gey

Finweek English Edition - - MONEY -

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.

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