6 December 2017
We asked Rocco Carr, business development manager and Francis Marais, research and investment analyst, both at Glacier by Sanlam, to take a step back, and observe some of the positives that we should be focusing on right now, as consumers and investors. The good news is clear: all is not lost.
“Many people are currently quite negative about investments on the stock exchange, mainly because of the low returns of the last two to three years. For South Africans, the political situation is also an inhibitor and the economy is viewed through a prism of corruption and political discord”, says Carr.
He cautions against focusing on this negativity. “The reality is different. Political events in South Africa cause volatility in the short term, but in the long term they usually have less of an impact than the international economy would”. Carr suggests examining some global trends, in order to understand what is expected in the future.
Marais concurs on the global outlook, and is adamant that we consider the ‘green shoots on the economic landscape’. This is helpful to reassure ourselves that there is hope for recovery. “The Chinese economy still is growing at between 6% and 7%”, he says. “This is positive for South Africa, as we are driven by commodities”. Locally, inflation is expected to decrease to between 4% and 6% during the next year. Interest rates should also decrease, and thus create relief for the consumer. “The sword of a further downgrade by Moody’s still may be hanging over South Africa, but the expectation is that this largely is priced into our market already,” Carr says. “Markets, in general, with fluctuation in between, should move upwards consistently over the next two years”.
“The recession, officially, is over” says Marais. “Consumers may not feel it in their pockets as yet, but there is definitely an upturn in the economy”. As Carr does, Marais cautions against allowing what he calls ‘short-term noise’ – all of the economic and political distractions – to railroad personal investment objectives. “Investments are, by their nature, long-term. There will be ups and downs on the journey, and some downs may seem devastating, but they should not underpin the investor’s future outlook and goals”.
The declining inflation rate bodes well for the interest rate stabilising, and is a positive for consumers incurring or managing debt. This also has a positive impact on the individual’s disposable income. A downer though is the oil price which is on the rise, leading to fuel price hikes, which always has the negative knock-on effect on consumer spending.
“South Africa has been in much darker places before. Everything happens in cycles, and the people of this country are profoundly resilient”, says Marais. “Civil society has found its collective voice again. What is emerging now truly is a mature, fully-fledged democracy. Also, let’s not forget that that our media largely continues to be free and fair.”
On the stock exchange front, he has noticed a recovery of equity market performances inflation to the same time last year. We have total return of the JSE All Share at 13.57% versus 5.81% at the same time last year (October 2016).
Marais reminds us that we have a very strong judiciary; our central bank is excellent; and our financial system is advanced and comparable to any in the developed world.
His Top 5 Tips to Keep Positive, could help us through the festive season and well into 2018:
This year, let’s focus on spending time – not money that may be in limited supply – on the people who are dear to us.
1 The Grinch is a fictional character created by Dr Seuss. Grinch is best known as the main character of the children's book How the Grinch Stole Christmas! (1957). The grumpy, anti-holiday spirit of the character has led to the term "Grinch" coming to refer to a person opposed to Christmas and festive season celebrations. https://en.wikipedia.org/wiki/Grinch.