While forecasting has often been labelled a fool’s game, there is still immense value in taking a broad look at the markets and the general direction in which they are headed. Here are some key points to consider when looking ahead at what 2015 may have in store for investors:
- The consensus view is that interest rates are going to start rising in the U.S. -however, sluggish growth in the Euro zone and China could weigh on global inflation and affect U.S. interest rate decisions.
- Some analysts believe that the U.S. dollar is entering a bull market – a strong U.S. dollar is not normally supportive of commodity prices.
- The global growth environment is expected to be unsynchronised with regards to the U.S. economy.
- In the United Kingdom, the economy may likely prove resilient this year, on the back of growth in the latter part of 2014.
- Europe and Japan, however, look set for a tough year…
- Globally, inflation is likely to remain at low levels.
Back on Home Turf…
- Sadly, the local economy is expected to remain stagnant. There are some concerns about slower growth in China, and this could have an impact on local mining companies – many of which have had a torrid few years already!
- It is useful to note that the South African stock market is not an accurate mirror of the domestic economy – it is estimated that companies listed on the JSE All Share Index derive about 45% of their earnings from outside SA (a lion’s share!), so the JSE All Share Index could continue to perform (with volatility) despite tepid growth at home.
- Many analysts are forecasting that equities (shares) will be the top performing asset class in 2015.
- It is expected that the South African Reserve Bank (SARB) will be cautious about hiking up interest rates.
- Cash will likely deliver a negative real return (below inflation), or it may simply perform in line with inflation.
- As always, the Rand is notoriously difficult to predict – some marketwatchers have it pegged at R11.80/$ during the course of 2015, with a risk of it going to R12/$ when the U.S. Federal Reserve raises interest rates.
As a parting note, remember that time and patience are an investor’s best friends – so while news and moves in the marketplace are always important to note, they should seldom be used as the basis for any major changes to your portfolio….
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson