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The best and the worst of markets in 2014

AlphaWealth also shares its experience and expectations.

Our pick of the eight most exciting developments of 2014>

Worldwide equities reached $66 trillion in value on 27 August 2014.

A better than expected pass rate for European bank stress tests with results released on 26 October.

Mark Shuttleworth won his exchange control case against the SARB.

The peaceful conclusion of the South African elections.

A steady recovery in the American economy.

Investors were able to purchase Apple shares at a single digit PE valuation in the first quarter of the year.

South Africa born Elon Musk continues to change the world we live in.  Tesla has begun building a new $5 billion gigafactory to produce battery packs for as many as 500,000 cars by 2020 on the back of increased sales of their electric cars.

A relatively benign beginning of the end of United States Quantitative Easing 3 in October.

 

The five most memorable events for world markets

The Fed started with its tapering programme, reducing its $85 billion a month bond-buying programme during the year as the US economy started to recover. Janet Yellenreplaced Bernanke as Fed chief.

Russia moved troops into the Crimea to protect its interests against Ukraine. The West imposed sanctions on Russia.

We saw a swift capitulation in oil price over a short period of time and an associated shale revolution.

The IPO of Alibaba resulted in the largest ever US listing.

US government-bond yields showed their highest daily decline in more than five years on 15 Oct (equivalent to a ten standard deviation move and dropping below 2% on the ten-year figures).

 

The seven developments we worried about during 2014

Putin’s taking of Crimea and his reluctance to heed calls to cease involvement in the Ukraine, resulting in sanctions being implemented. The impact on growth in Europe is still playing out.

Back in January, investors were spooked by bond and currency turmoil slamming emerging markets in Brazil, India, Indonesia, South Africa and Turkey. This sparked the biggest sell off in emerging market currencies since 2008.

The violent rotation from growth to value that took place in the equity markets during March and April which was followed by the merger and acquisition market breakdown in September and October.

The alarming number of lost/shot-down/crashed airline flights this year.

The Ebola outbreak spreading beyond West Africa.

The numerous (religious and terrorist) wars occurring across the world.

Ongoing service delivery protests and wage increase strikes which cripple our economy.

 

AlphaWealth  2014 in a nutshell

AlphaWealth’s flagship South African Hedge Fund of Fund and International Hedge Fund of Fund have delivered best in class performance over the last 12 months.

Launched a small and mid cap fund in October 2014.

2014 included improvements in our investment process which reflected in the solid performances of all our funds both locally and internationally.

 

What we look forward to in 2015

The change in the interest rate cycle out of the US and the impact on stock valuations.

Continued divergence in monetary policy between Japan/Europe versus US.

The roll-out of FSB-regulated hedge funds in South Africa.

We expect alternative investments to play a more important role in portfolios as equity returns mean revert and bonds risk / reward dynamic comes into focus.

Continued recovery in the United States.

Increased uptake in virtual currency, for example, Bitcoin.

Increased dislocation between the Eurozone and the rest of the world resulting in an unprecedented period of cheap European holidays for everyone.

Volatility in all markets could rise as we enter a period of increased uncertainty. Increased market volatility will result in a greater range of returns between asset classes, geographic regions and managers thereby providing us with increased opportunities to add value to clients’ portfolios.

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