Fluctuations in the markets are one of their defining characteristics. Various factors contribute to the vicissitudes of investor behaviour, both locally and globally, and many of these are psychological factors that are strongly influenced by perceptions – and an interest rate hike will surely shake the boat.
“Long-term investors should not expect to enjoy this year the spectacular returns they earned last year, but they need not fear the end of the bull market, especially in global equities.” So says IOL Personal Finance writer, Laura du Preez, in her article published in early Feb.
The beginning of February 2014 saw an increase in the interest rate as well as some market sell-off, which made some twitchy, but for those who keep their eyes on the long-term goals of their investment portfolios, this is merely part of the journey that ultimately has an upward trend.
Peter Brooke, head of Old Mutual Investment Group’s MacroSolutions boutique, says that the dips we’re seeing are a result of a general negative sentiment about emerging markets as a whole and the unanticipated interest rate increase combined with the selling off of South African bonds by foreign investors.
Offshore equities performed well last year, partly due to the drop in the Rand, but we’re seeing that it’s most likely that these investments will not carry the same kicker returns as 2013.
Looking beyond 2014, Paul Hansen of Stanlib says that they are expecting a nominal return of between eight and nine percent a year, on average, from equities, and through to the end of this year about five percent each from the bond market and listed property.