Markets & Equities

The A-Z of investments in 2018

A – ANC

2018 was tough year for the ANC. First, a change in “bodyguard” at the beginning of the year, followed by land reform and constant corruption charges against prominent members of the party. One can only assume that with the 2019 elections looming, things will definitely escalate going forward.

B – Bitcoin

Unless something significant happens, I doubt whether Bitcoin will make a return appearance in next year’s A-Z. Last year, I compared this cryptocurrency to the Tulip trade in the 1600s and it wasn’t long before Bitcoin suffered the same fate. After trading at levels of more than $19 000/Bitcoin in 2017, this year proved quite the opposite in terms of performance. It closed the year at $3742.70/Bitcoin.

C – Cash

Money market rates were relatively stable during 2018. It ended 2017 at 6.73% and currently stands at 6.71%.

D – Diversification

2018 reminded us yet again of the importance of a well-diversified portfolio. Investors had a tough time with both local and offshore shares, as well as property, while bonds remained reasonably stable with the SA All Bond Index showing 7.74% growth for 2018.

E – ESKOM

Just as we thought that the cloud over Eskom had a silver lining, loadshedding once again became a reality and everything plunged into darkness. If only this was Eskom’s only problem, they could probably get away by promoting romance by candlelight, but unfortunately this institution’s financial situation looks even darker than its power supply. Their profits decreased from R8.9 billion in 2017 to R1 billion in 2018, which is a truly massive decline, but that’s not all. Their outstanding municipal debt increased by R3.4 billion (25%) from March 2018 to September 2018.

F – FINANCES

There were multiple Minsters of Finance. Malusi Gibaba kicked off 2018 in this position and was replaced by Nhlanhla Nene in February. Nene resigned in October, however, after admitting to visiting the Gupta family’s home and offices. The very experienced Tito Mboweni was appointed in his place and he is now faced with the massive task of decreasing SA’s massive current account deficit as soon as possible.

G – Gordhan

Given all the drama surrounding Gigaba in 2018, he easily could have taken this spot, but I would like to dedicate G to someone that has really stood out in 2018. What a year it’s been for Minister Pravin Gordhan! After being dismissed by Jacob Zuma in 2017, there were speculations that he would be reinstated as finance minister for the third time at the beginning of this year. To the dismay of many, Pres. Cyril Ramaphosa had a different idea and appointed him as Minister of Public Enterprises. And this is exactly where Gordhan has managed to remove quite a few corrupt ministers and senior persons from their positions in a relatively short period.

H – House prices & properties

House prices, along with the rest of the SA economy, had a relatively tough year in 2018 and according to FNB, this segment grew by only 4.1% so far for 2018.  Listed properties performed poorly in what has to be one of its worst years to date, losing 25.3% of its value in 2018.

I – Inflation & Economy

With the release of the latest CPI figures, it seems as though our local inflation is relatively under control at 5.1% year-on-year. From a local economical perspective, South Africa didn’t do much better than last year. Although we managed to get out of the technical recession in the third quarter with 2.2% quarter-to-quarter growth, our year-on-year growth of 1% wouldn’t be nearly enough to generate enough jobs. Furthermore, this doesn’t seem to be the kind of problem that can be solved over the short-term, seeing that the IMF recently lowered our growth forecast for 2019 from 1.7% to 1.4%.

J – JSE

The JSE didn’t have a great year in 2018. The FTSE/JSE All Share Index declined by 8.5% in 2018 and the big shots suffered the hardest blows. From the list of Top 40 shares, six declined by more than 20% and four declined by more than 40%.

K – Know your limits

Although debt levels are still much higher than they were 10, 20 or even 30 years ago, debt as a percentage of income has seen a slight drop from 73% at the end of 2017 to levels of around 71% currently. Let’s hope this positive trend continues into 2019 with people knowing their limits. With the economy still under pressure, saving still not a priority for many and interest rates still low, however, a comfortable retirement remained a huge concern for many South Africans in 2018.

L – Long bonds

Long bonds (12 years plus) kicked the year off at 9.23% and ended at around 8.6% at the end of April. Shortly after, we saw a weakening in the Rand and an interest rate hike in November, which saw us back at levels of around 9.47% by year-end.

M – Markets

We already mentioned that the JSE had a tough year in terms of growth. The rest of the world economy only recently followed suit, after developed countries delivered fairly good growth. The FTSE 100 performed the worst (-12.5%) with Brexit now gaining momentum. The Japanese Nikkei 225 was also under pressure and ended 2018 down by 12.1% growth for 2018. The MSCI World ACWI Index is also trading 11.2% lower for 2018. Although the S&P500 also remained quite stable for the first part of the year, it also turned and ended the year 6.2% lower.

N – Naspers

We simply cannot do an A-Z without mentioning Naspers, which makes up nearly 20% of our stock exchange. At one point in 2017, this company showed a whopping 100% growth and still managed to end the year at a stunning 75% growth. This year, however, things changed and Naspers has seen a 16% decline in 2018.

O – Oil & Ore

Brent crude oil had a very interesting year. It kicked off 2018 at $66.50/barrel, then shot up to above $85/barrel, only to fall back to its most recent price of $59/barrel. Iron ore was still under pressure during 2018 with an approximately 8% decline in US$ terms this year.

P – Prime Rate

2018 was a rollercoaster year for interest rates. We started 2018 with a rate of 10.25%, and we’ll most probably end 2018 at 10.25%. We received a drop of 0.25% in March, only to see the rate increase by that very 0.25% again in November.

Q – QE

With the Fed’s first quantitative easing (QE) announced in November 2008, later followed by further QEs, it would appear as though they have now officially stopped. We are likely to see an interest rate hike in the USA before the end of 2018.

R – Ramaphosa

2018 marked the year of “Ramaphoria”. Around this time last year, it still appeared as though Nkosazana Dlamini-Zuma stood the best chance of becoming the next ANC president, which probably would have meant that she was also next in line to become South African president if all went according to plan for the ANC towards 2019. We all know that didn’t happen, as Cyril Ramaphosa didn’t only take the ANC leader crown, but also became SA president, following Jacob Zuma’s resignation. It’s still early days, but Pres. Ramaphosa has already made quite a deep impression, and I’m sure that it’s about to get even deeper as the 2019 political elections approaches.

S – South African Rand

2018 proved to be another rollercoaster year for the rand. It managed to strengthen very well after Cyril Ramaphosa’s appointment as president in December 2017, closing at R12.37/US$ for the year. Its good run continued into 2018 and in February, we saw the rand trade at levels of around R11.55/US$. Unfortunately, its success was short-lived and we saw it weakening to levels of above R15.40/US$ during September. Since then, it’s managed to get back on track and ended the year at 14.36/US$.

T – Trump

As always, Donald Trump definitely managed to pique public interest during 2018. Whether you like him or hate him, he simply still cannot be ignored.

U – UNSETTLED – South-African politics

We have made several references to SA politics so far, and it doesn’t matter who you vote for or what your political view is, everyone can agree that 2018 was quite eventful on a political front and with the 2019 elections approaching, things may get even more interesting.

V – Volatility

The SA Volatility Index was relatively stable in 2017 trading at an average of around 15%, but 2018 with all its uncertainty definitely changed that. We have been sitting at around 20% for the last two months, which clearly shows us that local shares are very volatile at the moment.

W – World Growth

I have mentioned SA’s economic growth already, or rather, the lack thereof. In stark contrast, the USA managed to do well with 3% growth, while Britain’s economy grew by 1.5%, China by 6.5% and Europe by 1.7%.

X – X-factor

Unrest in the Middle East remains a concern. Add the USA’s tense relationships with North-Korea and China into the mix and those concerns will continue to mount.

Y – Yuan (China)

Following the Shanghai Comp Index’s good performance in 2017, 2018 proved difficult for the Index, along with those of other developing countries. The Index was negative by 25% in 2018. The Yuan performed 5.5% weaker relative to the US$ in 2018.

Z – Zuma

We cannot end this year without mentioning Jacob Zuma. We already mentioned that Cyril Ramaphosa replaced him as president, but that didn’t move him out of the spotlight. Facing countless charges against him, I believe that we’ll still get to see a lot of Jacob Zuma in the media in 2019.


The opinions expressed in this blog are the opinions of the writer and not necessarily those of PSG. These opinions do not constitute advice.  This is intended as general information and does not form part of any financial, tax, legal or investment related advice. Although the utmost care has been taken in the research and preparation of this blog, no responsibility can be taken for actions taken based on the information contained in this blog. Since individual needs and risk profiles differ, it is always advisable to consult a qualified financial adviser before taking action.

Schalk Louw
As Portfolio Manager at PSG Wealth Old Oak and with over 20 years’ experience in the investment industry, Schalk has consistently delivered solid returns to his clients and has certainly become one of South Africa’s most well-known strategists. He started his career in 1994 at the stockbroking company, Huysamer Stals (later ABN Amro). He joined SMK Securities in 1997, (later became BoE Personal Stockbrokers) and was later appointed as director and branch manager. In 2001 he co-founded Contego Asset Management and managed the company as CEO up to March 2014, after which he joined PSG Wealth Old Oak. Schalk has also become a regular household name with investors, with his reports being published in many of the national press. He completed his MBA in 2008.

Leave a Reply