What’s the market expecting in 2019?

KRIS spoke to several analysts, institutions and fund managers to gauge what they feel 2019 will hold. The results were extremely interesting to us – here are the main points that were raised.

  1. Expect very slow recovery in the first half of 2019, accelerating in the second half.
  2. Valuations are important – the JSE is showing signs of offering value again. If there is a move towards Emerging Markets from international investors, we could see funds flowing into the country. Talks about the turnaround of emerging markets are flying high.
  3. Equities remain the best investment choice in terms of returns over the long-term.
  4. There is hope that SA Inc. will show some improvement after the May elections, but President Ramaphosa needs to get a strong, unencumbered mandate (vote).
  5. There might be some good recovery in small caps, but this will take some time to filter through.
  6. Policy certainty and a lower political-risk environment needs to be in place before funds will flow back.
  7. The market will be looking for improved disclosure (especially on Environment, Social and Governance (“ESG”) policies, approaches and measurements).
  8. Good companies will get better, bad companies will fold, and the best companies with undervalued share prices will either be bought or delist from the JSE.
  9. Better inflation management, a slight improvement in the consumer environment, a competitive exchange rate and the creation of an infrastructure fund should improve growth prospects going forward.
  10. Some Government infrastructure projects should be announced in the first half of 2019, boding well for the construction sector, and the economy at large.
  11. A lot of pessimism is already priced into the South African stocks.
  12. Global issues in the first half of 2019, including uncertainty regarding trade tariffs, China needing to maintain monetary discipline, Brexit results, Italy and the likelihood that the FED raises rates, will impact South African markets.
  13. Some positive signs are emerging – South Africa should have positive GDP growth again this year; interest rates also appear to be nearing the end of their hiking cycle; and fuel prices came down drastically in the past month or so and may even drop further. This will all have a more positive impact on the market.

“The stock market is like a beauty contest where you make money not by selecting which face you think is the prettiest, but by guessing who others will think the prettiest.”

In terms of predicting the stock market, we thought this article was a great read, giving good insight into the difficulty and built-in assumptions of market forecasts. This article opens with a quote we enjoyed – “Forecasting: the attempt to predict the unknowable by measuring the irrelevant; this task employs most people on Wall Street.”