PWM Connect Newsletter | Final Thoughts

Over the past few years, in my last regular Friday email for the year, I have shared that after 10 years as a financial planner, "I'm still looking for my first "normal" year (saying that it certainly wasn't it then)".  And yet again - this certainly wasn’t it!

I have attached our PWM Connect newsletter, sharing our overall thoughts on the last year. On page 18, we include, as a lifestyle section, 10 Healthy ways to manage life stressors from the Mayo Clinic.  

The Russian invasion of Ukraine today seems like it will be ongoing for quite some time, as well as the Israel/Palestine conflict.

Looking at offshore markets where our SA markets usually follow, earlier this year, I mentioned that for the 2022 calendar year, offshore markets seeing the MSCI Global World Index (global stock markets as a whole) doing -18% and Global Bonds doing -16%, that it was the worst offshore ever performance for a 60% equity / 40% bond portfolio offshore.     

Offshore markets have improved this year, coming from a low base, despite the most widely expected recession in the USA, which is still not yet taking place. If it does, at best, it looks like a soft one, with global inflation coming off its excessive highs earlier in the year, where at one stage, US and UK inflation was far higher than ours in SA.   

Factually, over eighty per cent of the US S&P 500 constituents have delivered better-than-expected results for the 3rd quarter, with less than fifteen per cent disappointing. On balance, two-thirds of those companies delivered positive surprises at the high end of historic levels. Shareholders generally have more reason to be cheerful than not. 

The MSCI Global Market (world stock markets as a whole) to the end of last month is up 18,6% this year-to-date (and 13,6% over the last year). However, I believe what many persons haven’t considered is that these are the returns they mostly know – but what it does also mean is that markets across the globe are still roughly around -3% down since the start of last year ($100 doing -18% last year, and adding back 18,6% for this year-to-date thus far). This certainly gives a better perspective overall, where offshore markets are still lower than last year's start.  

After the good start to this year, with most offshore markets neatly up initially, offshore markets started falling in July. They didn’t stop weakening until late October, on the back of global fears that offshore inflation would linger for longer, together with the October conflict in Israel causing the international oil price to spike, setting off a new round of inflationary fears.    

But then, over the last month or so, we had a bumper month, with offshore and SA markets as a whole gaining around 8-9% in November (for just the last month) on the back of global inflation retreating, that from our side we previously shared would be the case.

While this is a fantastic one-month result, to give context, it restores market levels to those around the end of June. Naturally, seeing the positive direction over the past month is still good. This, in turn, means that most of our local diversified investment portfolios are likely to end in the low double-digit percentage returns for this year. Our SA income funds should also reach double-digit percentage returns as long as the year closes without any unexpected hiccups.     

Through this, many of us were hammered during the year by the frustration of load-shedding, especially small and medium-sized businesses, whose countermeasures have been particularly expensive this year. Their silver lining in their capital investment to ensure business operations continue during load-shedding is that this should stand them in even better stead for the future in delivering goods and services without undue reliance on Eskom.    

This year also saw the monumental 4th victory at the Rugby World Cup, highlighting the role of Artificial intelligence (AI) in the future when it made relatively accurate predictions. The AI stats were correct throughout the pool stages, quarter and semi-final - until the final. But my bright actuarial colleagues were thankfully right when they said that, statistically speaking, the final was too small a pool to place reliance on when the All Blacks were considered the outright favourites.      

I, for one, believe that AI could be a game changer for preventing and detecting crime in SA. 

Our clients' portfolios are well-invested and positioned with the necessary diversification. As a result, I sleep well at night.

I remain mindful that financial planning ensures that your finances look after you no matter what markets do. The process remains only a conduit to living and optimising your ambitions, where you want to add significance to those closest to you.    

Within this framework, my concerns include longevity, where we believe the babies born today can live through to age 150. Increased medical costs after years of providers cutting back on benefits, there is little protection on future annual premium increases of 4-5% per annum over and above inflation, which is unsustainable in the law of numbers.

Education costs, including schooling and tertiary expenses, are also climbing more than inflation.

We are mindful that these are global concerns not restricted to only SA and are more financial problems than political ones that require financial solutions.  

As the year winds down, thank you for your valued support and wish you a wonderful festive season in making lasting memories with your loved ones.

Personal News from Jurie

I'll be away on annual leave from the end of next week (from the public holiday on the 15th), spending some time at the Beach in Langebaan and Still Baai.  

But, of course, the office is always open, and my wonderful assistants will be available for any queries. "Money never sleeps", so I'll still be checking my emails at least once a day as usual through to the Christmas weekend. 

FRIDAY FOOD FOR THOUGHT