The A-Z of in­vest­ments in 2016

What were the most im­por­tant fac­tors that im­pacted in­vestors in the past year?

Finweek English Edition - - MARKETPLACE INVESTMENT -

A – #ALLMUSTFALL

Af­ter 2015 was largely high­lighted by cam­paigns such as the #RhodesMustFall and #FeesMustFall move­ments, hopes were high that 2016 would be dif­fer­ent. Un­for­tu­nately, our hopes were in vain as the #FeesMustFall cam­paign only in­ten­si­fied. Let’s truly hope that 2017 marks the end of these de­struc­tive #AllMustFall move­ments and the start of a much-needed #SAMustGrow cam­paign.

B – Brexit

The ab­bre­vi­a­tion for “Bri­tish Exit”, which refers to the ref­er­en­dum held in June this year to de­ter­mine whether Bri­tain would re­main part of the EU or not. It came as a great shock when the re­sults in­di­cated that they would in fact be leav­ing the EU. The news caused havoc in the mar­kets and the pound’s value weak­ened dras­ti­cally against the US dol­lar − to lev­els last seen in 1985.

C – Cash

I’m sure that most pen­sion­ers ex­pe­ri­enced some re­lief af­ter two in­ter­est rate hikes in 2016. With money-mar­ket rates at 6.2% as at the end of 2015, the cur­rent rate of 7% surely makes for a wel­come in­come in­crease.

D – Di­ver­si­fi­ca­tion

In 2016 we were yet again re­minded of the fact that a well­diver­si­fied port­fo­lio pro­vides in­vestors with peace of mind. In­vestors who were only in­vested in lo­cal shares at the end of 2015 would have un­der­per­formed com­pared to all three as­set classes (as at 29 Novem­ber 2016): bonds, prop­erty shares and even the money mar­ket.

E – Econ­omy

From a lo­cal eco­nomic per­spec­tive, South Africa suf­fered another bad year in 2016, af­ter record­ing growth of only 1.3% in 2015. Stan­dard & Poor’s is fore­cast­ing growth of only 0.3% this year, with a slight re­cov­ery to 1.2% in 2017. Stan­lib warned that SA will strug­gle to lift its growth rate mean­ing­fully back up to 2% over the next two years given low busi­ness con­fi­dence, do­mes­tic pol­icy con­straints and be­low-av­er­age global growth.

F – Fed­eral Re­serve

2016 cer­tainly proved to be an in­ter­est­ing year for the US Fed­eral Re­serve (Fed). The year didn’t kick off with the ques­tion of how many in­ter­est rate hikes would take place, but rather when the first one would take place. One can­not but won­der whether there would have been more than one hike if Trump hadn’t been elected pres­i­dent, but stay tuned as we be­lieve things will get even more in­ter­est­ing as we move along.

G – Gold

Af­ter drop­ping to $1 060/ounce at the end of 2015 from $1 700/ounce at the end of 2012, I had to ask whether this was the end of the price drop at the be­gin­ning of this year. Amongst all the un­cer­tainty sur­round­ing Brexit and Trump, we didn’t only see the gold price re­cover, but also rally a bit to its cur­rent price of $1 193/ounce.

H – House prices

Higher in­ter­est rates con­tin­ued to take their toll on lo­cal house prices, which, ac­cord­ing to Absa, only rose by 4.4% over the last 12 months. For the first time in a very long time, listed prop­er­ties couldn’t man­age to out­per­form the money mar­ket. At 6% growth up to 29 Novem­ber 2016,

how­ever, they still man­aged to out­per­form lo­cal shares.

I – In­fla­tion

In­fla­tion is the sweet and sour sauce of 2016. The re­cent 6.4% year-on-year growth def­i­nitely falls out­side of the level where it’s sup­posed to be (4% to 6%). But when we con­sider the great drought, higher oil prices and a rand that is still trad­ing higher than last year’s av­er­age, we can be thank­ful that it wasn’t even higher.

J – JSE

Af­ter grow­ing by only 5% last year, 2016 def­i­nitely didn’t turn out to be the lo­cal mar­ket’s turn­ing point. On the con­trary, it was a par­tic­u­larly poor year on the FTSE/JSE All Share In­dex, with a mere 1.5% growth up to 29 Novem­ber 2016.

K – ‘Kite-Fly­ers’ So­ci­ety

Debt lev­els are still much higher than 10, 20 or even 30 years ago. How­ever, debt as a per­cent­age of in­come has come down in 2016, from 78% at the end of 2015 to 75% cur­rently. Let’s hope that this down­ward trend con­tin­ues in 2017.

L – Long bonds

Long bonds man­aged to side­step the 2016 in­ter­est rate hikes and look­ing ahead, the gen­eral im­pres­sion is that rates may not stay too high for too long. Long bonds closed at 10% at the end of 2015, and at their cur­rent level of 9.2%, they may just take the prize for best-per­form­ing as­set class of 2016.

M – Maimane & Malema

2016 turned out to be a good year for both the DA’s Mmusi Maimane and the EFF’s Julius Malema. There were great ex­pec­ta­tions and ex­cite­ment sur­round­ing the 2016 lo­cal mu­nic­i­pal elec­tions and the re­sult was a huge suc­cess for both par­ties, with the ANC hav­ing lost the most sup­port­ers.

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