Investment: Focus on retaining your wealth in 2019
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The year 2019 will be a time to focus on retaining wealth rather than increasing it, says John Doidge, chair of Geneva Management Group.
The end of 2018 was turbulent for stock markets around the globe – and SA has its own unique challenges, he told Fin24.
“Last year there were opportunities if one scratched around in the right places,” he said.
At the same time, he doubts if one could expect anything “spectacular” in the short term.
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“One concern about SA is that there is a lot of pressure on state-owned enterprises (SOEs) to cut back on costs. Whilst this may be positive for the fiscus, it is likely to add to unemployment,” said Doidge.
There is pressure on Eskom, Transnet and SAA, for instance, to reduce their head count.
Moreover, the state of SOEs could impact the market overall, Doidge believes. “One would have to see how much of a majority President Cyril Ramaphosa gets in the national election.
“It would be positive if he obtains a good majority, but he has a huge job on his hands to deal with realism on the one hand and populism on the other. How he deals with this will affect investor confidence,” he said.
Not enough jobs
“Jobs are not really being created in SA at the rate required. There are more than a million school leavers each year, less than half with matric.
“Government has undertaken to add 270 000 jobs a year for the next five years. This is simply not enough,” he told Fin24.
In addition, Doidge is concerned about the impact on the markets of civil unrest in the country due to unemployment.
Doidge believes the rand could strengthen after the elections, depending on the outcome. “The dollar is under some pressure and I think the rand, which is fairly liquid, could benefit from that,” he said.
Asked about cryptocurrencies, he said these experienced a massive bull run in 2017, but fared far worse last year. “My general view is: don’t go for cryptocurrencies unless you really know what you are doing.
“The crash that we saw last year might well be an overcorrection and there might be possibilities for investors to get some of what fell below its true value,” he said.
As for investment in general, he said there are opportunities.
Until things have cleared up between China and US and about Brexit, he thinks, however, that investors will go into a “holding pattern”.
“But there are opportunities beyond traditional equities. There are investment opportunities, for instance in real estate.
Some of the big capital market funds also offer good returns,” he said.
READ: Investment: is the equity party over?
In his view, there will not be a global recession in 2020 or even sooner, because internationally there is still year-on-year growth seen in the short-term.
“It is likely that 2019 will be about consolidating and retaining wealth rather than growing it,” said Doidge.
“Yes, some investors have had returns last year in negative territory, and so I think many are trying to ride out the downturn and trying to remain as liquid as possible.”
The problem is, therefore, trying to find some kind of return on investments. There will still be growth areas that savvy investors can take advantage of in the coming months, Doidge believes.
He thinks the US will still offer some opportunities in the manufacturing sector, while the property sector in Portugal and the former Baltic states, for instance, have opportunities.
As for SA, he said political stability would be key to attracting investments – not just from foreigners, but from South African investors too.