Just a brief comment on the current state of the markets. The year got off to a steady start but the threat of inflation and the prospect of rising interest rates globally to combat it, together with the US Federal Reserve’s decision to ease back further on its quantitative easing programme, has led to a bit of a run on currencies, particularly those in emerging markets of which SA is one. The Rand has depreciated sharply and is only expected to recover later on in the year. It is possible that our Reserve Bank will deem it necessary to raise rates again in the foreseeable future but they are fully aware that economic growth must not be stifled as a result. It’s a delicate balance. We can but hope that the attractiveness to foreign investors of increased interest rates together with a cessation of “strike season” may have a positive effect on our currency sooner than currently predicted.
All this has affected the global investment scene with stock markets, particularly those in the emerging economies, continuing to show declines and this despite the fact that they now offer excellent value. Unfortunately investment in these markets, as with everything else, is often driven by sentiment alone.
Investing globally remains key and to this end clients are advised not to be overly concerned with short term volatility but rather to stay with a strategy of diversity across the investment spectrum.