What returns can investors expect from 2014 and the years beyond? We are coming out of a 10-year bull run where clients made excellent returns on the Johannesburg Stock Exchange. A quick look at the facts tells as where we as a nation are positioned going forward.
South Africa still has a very high deficit account which has mostly been funded by foreign investors. Therefore a key question to consider is whether foreign investors still remain in South Africa? The JSE is trading on a PE of 16, a very high PE and investors will have to search to find real value shares. Our repo rate (prime lending rate) is low and government may be forced to increase it, putting further strain on low and middle income earners. The Rand has depreciated by 20% this past year, and may continue to depreciate going forward. A weak Rand affects fuel and import prices, putting further strain on food and clothing prices. Unemployment is continuing to grow and GDP forecasts look lower than last year.
The facts speak for themselves; tough times are still ahead for the average South African. But being an entrepreneurial, positive and ambitious nation I am confident we will come out of the next season stronger and more determined than before.
A recession is often a necessary evil for every country as it does away with unprofitable businesses and causes both businesses and households to tighten their belts and trim excesses. This past recession was the first the United States has had since the Great Depression and many argue that is why this country has battled to the extent that it has. Whether or not they have trimmed enough excesses remains to be seen.
What does this all mean for you and me? Keep things simple – spend carefully, save what you can and keep your dreams and goals alive. Having a dream to plan and save for keeps us focused on the bigger picture and less worried about the day-to-day.