The start of a new year brings with it a fresh mindset with which to consider investment prospects for 2017. Over the course of any given year, and in particular an economically busy one such as 2016, it is easy to lose track of where we are as we attempt to digest the reams of information hitting us on a daily basis.
To recap briefly, over the past 12 months we’ve needed to consider the implications of Brexit, Trump, Chinese debt and shadow banking, SA politics, the rand which started at R16/$ and ended at R13.70/$, a significant US rates hike, an emerging market crash and recovery, and OPEC cutting oil production and causing the price of oil to double to $56/barrel. That is without considering the individual asset classes which we can consider for investment or any of the numerous fund manager changes over the year.
Unfortunately, the world is no more normal than it was 12 or 24 months prior to today, and is unlikely to be in the near future. The policy implications from a Trump administration appear positive for growth (and therefore investment prospects), however this comes with a fairly strong health warning as the US is a repeat offender in creating bubble valuations without the necessary fundamental underpin. There is also the potential for Trump to materially change how the west deals with the east in terms of trade between the economies, causing further market risk.
Locally we will be going through a transition phase as potential suitors come forward for the ANC presidency and quite probably the South African presidency come 2019. Depending on which faction takes the lead here, we could either find the base for an economic recovery, or potentially find ourselves in a worsening position driven by political uncertainty – the outcomes are far apart and equally likely. In addition, the credit downgrade risk remains.
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