Floris Slabbert’s market update on Groot FM, Tuesday 30 January 2017.

Market update

  • Locally, the JSE All Share Index lost 1.4% in value since Friday. This was due to speculation that a cabinet reshuffle will see Finance Minister Pravin Gordhan removed from his position.
  • Internationally, markets are also trading lower. This is mainly due to political uncertainties, including the implications of Brexit andDonald Trump’s presidency that are becoming clearer.
  • The fuel price will increase at midnight tonight. The increase is due to a rise in international oil prices, currently trading at around US$ 53 per barrel. The rand’s volatility over the last few weeks added to the underlying reasons for this increase. At the time of broadcast, the currency was trading at around R13.51 against the dollar, close to the same level as recorded last week Monday. Unfortunately, it is likely that the pump price will increase again when the Minister delivers the 2017/2018 Budget presentation on 22 February and adds additional taxes to the base cost.

The effect of inflation and the strengthening rand on investments

  • Only 24% (238 out of 992) of registered unit trusts outperformed inflation.
  • The investment costs related to these products can amount to up to 3% per annum.
  • Therefore, to outperform inflation, investors need certainty that their investment returns will exceed 10% per annum, to outperform the effects of cost and inflation.
  • To do that, investors should take ownership and look at the net effect. In other words, investors are encouraged to know what their returns are after costs and taxes have been deducted and understand what the underlying investments of their portfolios include. Additionally, accept risk as part of the investment process and balance the trade-off between risk and return.

Watch the full interview here: