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Investonline 2019 wrap and 2020 view

Solid investment performance – Year to date, our recommended aggressive, moderate and conservative portfolios have outperformed the comparable industry averages by 5.1%, 0.9% and 2.3% respectively. This outperformance has been supported by our number 1 rated Prosperity Fund returning 15% to date, which forms a minor portion of our moderate and conservative recommended portfolios.

Superb client retention – We retained 99% of our clients, at a time when most advisors have been reeling as unsatisfied clients look for “greener pastures”. Our good retention is a result of superb client service and the benefits of our interactive financial planning process and models.

Strong growth and re-investment – Once again, we grew our assets and client base materially. Contributing to our success is a strong team approach with a continued emphasis on our ongoing training and education. We’ve invested in more staff and have upgraded our information systems with the addition of the latest and best financial planning models and tools, all with the endeavour to maintain our high client service levels.

The evolution of our brand with the emphasis on “Work Wisdom Wealth” as this highlights our strong commitment to and belief in our values, ethos and culture that underpins the value added to our clients.

Monitoring our predictions during the year

The ANC to increase its majority to 60% from 54%. The ANC won the election in May with a 58% majority, which we and many others predicted was the right percentage majority. A fair result that was not too high to think themselves unanswerable to the minority and not too low to deplete Ramaphosa’s powers.

No Moody’s downgrade – This has not taken place, but we believe there is a high likelihood they will downgrade us in 2020. This will not be disastrous as it is already priced into our markets and it will remove the negative uncertainty around the event.

Rand / Dollar to trade in a range between 13.5 and 14.5. The Rand has remained volatile trading between a low of 13.26 and a high of 15.48 this year. Currently trading at 14.7, despite stage 6 load shedding, we believe the Rand is unlikely to weaken materially into 2020.

Chinese growth slowing – Economic growth slowed to 6% in the 3rd quarter, the lowest in 27 years. We believe this gradual slowdown is expected, but the fear is that a material slowdown could be imminent.

Better investment return in 2019 – The JSE All Share Index is up 8.4% year to date, as opposed to 2018 being down -8.8%.

Sector selection and a large difference in fund performances – Resources are up 15%, Industrials up 4%, Financials down 7% and the Rand / Dollar is 2% up year to date. Unit trust performance has varied significantly: Aggressive funds 0% to 33%, Moderate funds 1% to 17% and conservative funds 4.8% to 13.5%. Our Prosperity Fund has returned 15% year to date.

SA turning up

For South Africans, 2019 has been a year of waiting for some positive action by the government to boost confidence and get the economy going. The long wait has been depressing to such an extent that even winning the rugby world cup did not get the celebration it deserved.

This negative mood put a lid on our equity market after a roaring start to the year. From April to date the JSE All Share Index is down 5.3%, although year to date, the average equity fund is up 4.5%.  However, over the last two years the average equity fund is down 2.7% per annum.

So where to from here?

We believe the tide has turned due to some positive government action taking place:

  • A new Eskom CEO that is likely to split Eskom into 3 independent units that will facilitate the necessary “rightsizing” of the utility
  • Putting SAA into a “business rescue” status, which will enable a proper restructuring with a likely private partner
  • Putting Prasa into “administration”, which should facilitate operational changes.
  • The NPA intensifying their investigation into corruption with the likely arrests of some high-profile politicians in 2020.

As the government becomes more proactive, consumer and business confidence will improve, which is the much-needed change to grow the economy.

With investment values low, scope for significant interest rate cuts and the government starting to act, we believe a return in local investment growth will take off in 2020.

Our most popular articles of 2019

In 2019, we sent out 24 newsletters which included 4 quarterly investment market reports. We are thankful for the large readership of our articles and list the three most popular of the year:

How much do I need to retire? 

Offshore tax, financial emigration and investment structures

Forecasting the Rand exchange rate

Financial Planning for 2020

See our easy 3-step financial planning process

 

Looking forward to a prosperous 2020

We look forward to another successful year of ensuring that our clients have the best financial plans that provide them with the most suitable investment strategy to match their needs.

We wish you a blessed Christmas and a relaxing holiday and look forward to working with you in the new year.

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