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A: #ALLMUSTFALL
2015 definitely stands out as the year when everything fell.
It started with the University of Cape Town’s #RhodesMustFall campaign earlier in the year – followed by violent protests at other universities across South Africa as part of the #FeesMustFall movement – which concluded with no university fee increases for 2016.
Let’s hope that next year marks the end of these #AllMustFall movements and the start of a new #SAMustGrow campaign.
B: BANK LENDING RATE (PRIME RATE)
The end of 2014 brought about rumours of an interest rate hike in 2015.
Surprisingly, we faced two hikes this year. Luckily, both increases were gradual, bringing us to our current prime rate of 9.75%.
Overall expectations indicate that this will not be the last increase, so all eyes remain focused on 2016.
C: CASH
I’m sure that most pensioners experienced some relief after the combined 0.5% interest rate hike in 2015.
With money-market rates at 5.6% at the end of 2014, the current 6.2% will surely be welcomed by pensioners.
D: DIVERSIFICATION
In 2015 we were reminded of the fact, yet again, that a well-diversified portfolio provides investors with a peaceful night’s sleep.
Investors who were only invested in shares and who decided to decrease their risk by diversifying towards the end of 2014 would have sported a 7.82% return in the Multi-Asset Low Equities Class, and a 7.93% return in the Multi-Asset High Equities Class.
The FTSE/JSE All Share Index delivered a 6.96% return over the same period.
E: ECONOMY
With the local GDP showing growth that was close to 1% lower than that of the G7 developed countries in 2015, we should consider ourselves lucky that the rand didn’t weaken even further.
The International Monetary Fund’s expected GDP growth for 2016 is a mere 1.3% for SA, which leaves little room for improvement over the short term.
F: FEDERAL RESERVE BOARD (FED)
Following the financial crisis of 2008, the US Fed dropped interest rates from 5% down to an average rate of 0.13% between 2009 and 2014.
Just as in 2014, speculation was strong that quantitative easing would end and that interest rates would start to rise in the following year.
Although this still didn’t happen at the end of November, the Fed is expected to announce its first increase before the end of the year with regular increases to follow in in 2016.
G: GOLD
With the price of gold at more than $1700 per ounce in 2012, it has now dropped to its current level of $1079.60/oz (as at 7 December – R15?680.87) in a mere two years. Only 2016 will tell whether this marks the end of the price fall.
*Schalk Louw is a portfolio manager at PSG Wealth.
This is an excerpt from an article that originally appeared in the 17 December 2015 edition of finweek. Buy and download the magazine here.
