2019 market: key events to watch

While there’s no way of predicting 2019’s market outcome, we can highlight some important events which may influence stock market returns:

Investors will be encouraged by a perceived business-friendly outcome and discouraged by any uncertainty in the elections’ outcome, as will the ratings agencies.

In 2018, SA experienced its first technical recession since the global financial crisis, while global GDP grew 3.7% and developing economies 4.7%, according to the International Monetary Fund.

Fortunately, SA recovered quickly with positive third quarter growth.

What is of increasing concern is the view that world GDP has plateaued and won’t be a tailwind to local GDP growth.

Two major global uncertainties set to continue are trade wars and Brexit negotiations.

The world has benefitted from globalisation and any moves away from this will almost certainly be inflationary.

Will consumers be satisfied with paying higher prices for goods because they’re locally produced, or will companies need to tighten their margins so as not to pass on all costs to consumers? Only time will tell.

Will investors only be interested in equity returns?

The SA 10-year nominal government bond continues to offer yields in excess of 300 basis points above inflation, which could serve as a strong anchor to performance if short-term volatility can be tolerated. Every investor should hold a portfolio aligned to their specific risk profile. Luigi Marinus is portfolio manager at PPS Investments