Advice from the financial team – January 2015

Advice from the financial team – January 2015

As the volatile and uncertain 2014 has drawn to a close, we would like to take this opportunity to thank all of our clients for your continued support. We wish you and your family a happy new year and look forward to another successful year engaging with each and every one of you.

2014 was certainly a year of ups and downs, with far more muted returns globally then we have become accustomed to. The US seems to be one of the few places that have strengthened over the year, with most of the rest of the World struggling along. Locally, Listed Property has continued to surprise on the upside, with far more reasonable returns across the other asset classes.

US: Although the economy is showing signs of improvement, the S&P500 can’t go up forever and 2015 could be a very different environment. The Fed has used significant and unprecedented monetary policies over the past few years and the verdict is still out on how the US will move away from these policies. The impact of which is massive for global markets as many countries will raise rates in response to the US. Given the Fed Policy, it is also likely that the Dollar strength will continue, negatively affecting US Exports and the bottom-line for many multinationals.

Eurozone: Stagnant wages, lagging performance and the risk of deflation are cause for serious concern. A weakening Euro will certainly help exports become more productive, but the Eurozone has a long way to recovery and is likely to diverge from the stronger developed economies.

China: Numerous forecasts suggest that growth is expected between 6% and 7% in 2015 as the giant seems to continue slowing. Due to China’s size and hopes for urbanization and a transition to a consumer and service based economy, growth of 7.2% is required just to create enough jobs for prospective workers.

South Africa: There are concerns that the impact of unemployment, load-shedding and industrial action will take its toll on economic growth in 2015. The 2014 year closed out with a weaker Rand, but inflation lower than what was originally expected, largely assisted by the weaker Oil and Commodity Prices. There remains a lot of uncertainty around raising interest rates, given the potential for the US to begin in 2015, but a much weaker South African economy.

Whatever 2015 holds, investors should stick close to their long-term asset allocation strategy as a way to stay protected from potentially turbulent markets. For 2015, it is unclear which asset classes and geographic regions will outperform; diversification remains vital in uncertain times.

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