Looking Ahead at Markets and Inflation

Following on from the “8 Curiously Common Mistakes That Investors Make” article and how it is often human nature to expect investment returns to only go up after a period of good returns, it is worth noting that a generally held view amongst asset managers is that we are going into a lower-return, higher inflation world. The point is it would be prudent to lower our expectations going forward.

Ten years is a long period to forecast but the following is Coronation Fund Managers, a leading asset management company’s forecast of asset classes over the next 10 years:

Last 10 years
(ZAR annualised*)
10 year forecast
(ZAR annualised*)
Local Shares 19.9% 7   –  10%
Global Shares 12.1% 10  –  13%
Local Property 23.6% 7  –  10%
Local Bonds 9.2% 6  –  9%
Global Bonds 9.0% 5  –  8%
Cash 7.9% 6  –  8%
Inflation 5.7% 6% +

With regard to inflation in South Africa, and looking specifically at middle to higher income groups, Coronation Fund Managers believe that real inflation is higher than 6% because of the disproportionate exposure of these groups to electricity, water & rates, education and insurance (including medical aid).

*Average amount of money earned each year over the 10 year period.

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