July was National Savings Month. The objective of this past month was to raise awareness on the importance of saving and the impact it may have on your long-term investment objectives and retirement days. However, we are currently faced with a very challenging investment environment:
- Eskom is expected to get a bailout of R59 billion.
- Moody’s suggests the bailout for Eskom is credit negative.
- The US Federal reserve cut interest rates by 25 basis points – the first time since the financial crisis in 2008.
- Brexit – deal or no deal?
- Theresa May stepped down as UK prime minister and was succeeded by Boris Johnson.
- The US/China trade war still seems to be a talking point.
- Trump imposed tariffs on certain goods.
- China responded by devaluing the yuan and stopping US farm imports.
- Public enterprises minister Pravin Gordhan is at war with the Public Protector.
- State capture is still a major talking point.
With all the uncertainty, not only in South Africa but globally, why would one still want to invest? Let’s look at some of the numbers:
|Year to date returns as at 31 July 2019|
|JSE Overall (JHB)||7.68%|
|JSE Top 40 (JHB)||8.71%|
|Dow Jones Futures (New York)||15.79%|
|S&P500 (New York)||19.52%|
|All Ords (Sydney_Aus)||20.47%|
This gives an indication that if you were invested in the market you would have made satisfactory returns this year, but it’s not that simple. If it was so easy, everyone in the world would be making millions; debt wouldn’t be an issue; and people would be buying luxurious houses and driving upmarket cars (Lamborghini, Ferrari, Rolls Royce, Maserati), but let’s face it, the most common cars on the road today are Toyota, Ford, VW and even Haval.
So, what makes investing so difficult?
There are many different asset classes – such as equities, property, cash, foreign, bonds – but finding the right balance at the right time could prove to be very challenging and, choosing the best performing funds with the lowest fees is not always an effective solution. A well-balanced portfolio could provide you with the most consistent returns, but as experienced in the last few years, this has also proven to be challenging.
There has also been a lot of talk about cryptocurrencies which are expecting to deliver exceptional returns as it could become the next global currency. But who sets the price? Is it just based on the simple economic rule of demand versus supply? Why would you want to pay more for a cryptocurrency than the actual value of the commodity? Which is the best cryptocurrency to buy? You need to consider the risk associated with investing in cryptocurrencies. The risk is very high and it’s in no way an easy way to make a quick profit.
With all the uncertainty globally, the negative news and so many unanswered questions, investing becomes very challenging. Global & Local does not have a crystal ball that will provide all the answers, but there are always opportunities out there – both locally and internationally. You need to take your long-term objectives into consideration and should not let emotions or greed affect your decisions, as this could prove to be very costly for your golden retirement days.