New year, new outlook!

Author: Menachem Kay

We are only a few months into the new year, but what a different year it has been already!

Along with some of our team, I have just returned from the UK where we had the privilege of meeting with, and hearing from, some of the top fund managers from across the globe. It was enormously insightful and interesting to hear diverse views and opinions on the chaotic yet dynamic world in which we live, although there were certain themes that seemed common through all of the conversations.

The most prominent of these was that of ‘surprise outcomes’, beginning in June 2016 with Brexit. Hardly anyone correctly called the UK’s decision to exit the Eurozone. Despite it having been an extremely close vote, global financial markets were altogether surprised by the outcome. Further to this, Donald Trump’s victory as POTUS seemed unlikely all the way to the very end. And of course, Leicester City’s fairy-tale Premiership victory certainly wasn’t the pundit’s choice at the beginning of the season!

But it was the second common theme that I found most interesting. It was not so much that the predictions of the results themselves were wrong, but more the fact that the expected impact of these outcomes on the markets was so far off the mark! Theresa May has only recently been given parliamentary authority to begin the Brexit process. And while the pound has already weakened somewhat, at this early stage it is very difficult to foresee exactly how that whole process will play out.

International news agencies made it very clear that should Donald Trump win the US presidential election, it would be devastating for markets. Yet markets have, broadly speaking, had a positive reaction to Mr. Trump’s victory – already called The Trump Rally.

I watched his victory speech from our London office, and was astounded to see markets improve almost as soon as he began speaking.

The US and UK economies are recovering, albeit slowly. Europe, on the other hand, continues to be plagued by internal discord. And with some significant and potentially disruptive elections scheduled for the region during the course of this year, I think we would all do well to remain cautious of this area.

Here at home? Well, our beautiful country continues to have its own challenges. There’s no doubt, 2016 was a difficult year for us all. The market was flat, the drought severely damaged our agricultural sector, and the constant Zuma vs. Gordhan debacle did us no favours, adding to an already heated environment.

This uncertainty has continued into 2017. From the farce that was SONA to the drought that still grips much of the Western Cape, it is sometimes easy to become a little despondent. Add to this the world’s ever-changing, risk-on/risk-off view of emerging markets, and the pressure this brings to our economy, our market and our currency are clear to see.

But here is the silver lining, which I believe is truly significant: volatility brings opportunity!

The last quarter of 2016 was an extremely bumpy ride, and almost all assets returned negative. But 2017 has so far been particularly positive. At the time of writing this article, the markets were up around 5% since the start of the year, and gold and platinum were up by substantially more. The rand had appreciated to multi-year highs, and there was a far more opportune feeling about the market place and opportunities to invest and grow your wealth.

I have made no secret of my positivity and optimism for 2017. While I believe it is going to continue to be volatile, I also believe that it is going to be a far better year than 2016.

On a lighter note, our Proteas made us extremely proud in decimating the Sri Lankans, and are confidently off to New Zealand where we hope they will continue their magnificent form. Perhaps some of this will rub off onto the Boks?

Lastly, I mentioned before that we had just returned from the UK (lately I seem to be there so often, I am even getting used to the cold!). I am delighted to report back on the continued evolution of our offshore offering. Together with our corporate partners, Sanlam, we have generated another year of sterling (no pun intended!) results across the Octagon USD and GBP solutions. Through this partnership we have been able to access some of the finest fund managers in the world, and this has certainly been reflected in our results.

By ensuring an applied and consistent approach across the range, and a view towards ensuring your total portfolio is optimised and globally relevant, these offshore offerings are the perfect complement to our local range of funds. Please speak to your Octagon financial advisor about these global diversification opportunities.

Thank you for another year of your continued support. I wish each of you a healthy, calm and most of all, prosperous 2017!