An overestimation of the Chinese economies growth, and  them moving from a manufacturing  to a consumer economy has led to the decline of the commodities market, added to the depreciation of GEM (Global Emerging Market) Currencies, and has had a negative effect to the South African mining and resources markets.  

Grexit (Greece Exit) and the effects on the Eurozone seems to be a never ending issue affecting the global markets. Greece took a referendum vote,and the country voted against a 3rd bailout, the government of the day however accepted it weeks later.

With Greece only contributing 2.5% GDP to the Eurozone and the risk of a contagion in the surrounding economies (Ireland, Italy, Portugal, Spain) if Greece left, less than it was in 2011. Analysts say the effect of them leaving will now not result in a major negative event.

The FED interest rate hike is a will they, won’t they daily debate in the markets. Most know that it is just a matter of time, and want the rate hike to be announced ASAP to take out the unnecessary volatility due to speculation, in an already volatile marketplace. The American economy has recovered well according to economic indicators like employment figures, which show that they are back to relative full employment. The figures show that the U.S. economy is as healthy as it was in the early 00’s. The FED will look to raise the interest rate whilst the economy is healthy to afford them a safety net, for when times get tough and they need to stimulate growth again.

During uncertain times like these, balanced funds look to protect investors’ capital and although short term returns may seem small, overtime the returns are more stable due to this approach.

Through limiting the risk in the lean years, a balanced fund limits the bear market from eating away at the capital investment. Often we look at high risk equities, see high returns and try to compare it to a balanced funds returns without looking at the whole picture. The high losses of these equities during the ‘hard times’ can result in the initial capital investment being irrecoverable. In a volatile market, like the one we are experiencing, knowing when to get in and out of high risk equities is difficult for even fortune tellers and soothsayers.

Due to this volatile environment many fund managers are looking to protect from a loss of capital. With economic growth slowing down, the risk of a South African stock correction, and a looming bear market, single figure returns look foreseeable in the short to medium term. Long term investors should however benefit as many economists views are that we’re seeing the end of the down cycle in markets such as commodities, GEM currencies and GEM equities, and investors should benefit from the bounce back as long as they leave their capital investment untouched during these lean years.

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