As we said goodbye to 2015 we couldn’t help but reflect on what a poor year it had been for investment markets globally. Just about all asset classes showed negative returns. Our JSE All Share was flat but, in global terms, down horribly as the local currency depreciated nearly 40% against the USD.
Whatever happened last year did not adequately prepare us for the beginning of 2016 which has been characterised by what can only be described as extreme volatility. The further collapse in the oil price and the slowdown in China together with mixed signals regarding stalling US economic growth and interest rate hikes have all served to make this the most turbulent time since the financial crisis of 2007/2008.
Emerging markets have not been helped by the continued slowdown in demand for commodities. However, perhaps at last there are some signs of life in this area with a revitalised gold price and perhaps a bottoming of oil leading the way.
Apart from India, which seems to be powering ahead economically as the world’s fastest growing economy, global economic growth can best be described as anaemic. As always, there are pockets of opportunities and this is where we rely on the skills of our asset managers to seek out and take advantage of those opportunities.
It seems that whatever happens we have entered a period where lower investment returns may well be the new normal. We still believe that investment diversification is the best way to go. This is not a time for panic with wholesale changes but to rather keep to a carefully planned path.