Finding Hope in a Volatile Market:

Why the recent trend of Low Returns is not the End of the Road...

Returns on South African investments, equities and bonds have been trending in a seemingly negative slope for the last little while, with 2022 being another tough year in the market. This has caused obvious and justifiable concern among some investors. Upon receiving their quarterly statements, clients of different FSPs have been shocked, and have a sense of uneasiness about the security of their financial future.

However, we feel that these anxieties are something that can be quelled by the facts - which is what we are here to give you!

Influences on Investment Returns for 2022

With South Africa's economic growth being lower than expected for 2022, as well as a decline in global economic growth, and inflation increasing from an average of 5% to 8% globally; it's safe to say that 2022 was not a good year in the financial sector, both globally and for South Africans.

Some of the factors contributing to these declines are the internationally hiked prices of fuel, energy and food for a large portion of 2022. Swiftly increasing food prices were a major contributor to global inflation, and it is estimated by IMF Blog that the global cost of living has risen more since the start of 2021 than it did from the years 2015-2021 combined! Add to this the impact that the Russia-Ukraine war, and the low unemployment rates in more developed countries has had on global inflation, on top of our own local causes for inflation increases such as job loss and hiked electricity prices linked to load-shedding and energy-saving.

According to Business Tech, the lowering of South Africa's sovereign credit rating in 2020 would have deeply influenced return on investments over the last few years too.

Since we seem less promising to foreign investors, some may pull their money out completely, while other potential investors may simply decide not to invest in other South African shares where they would have previously. On top of this, they refer to the decline in South Africa's Macro-environment (a country's cultural, technological, natural and political environment), which has also had a directly negative impact on foreign trading in South African bonds and equities.

HOPE for the Future of your Investments

Remember when we said we have the facts for you? We promise they're not all bad!

For example, here's a great one: Markets have always trended upwards, despite multiple worldwide and local calamities or setbacks that have caused declines over certain periods of time. But don't take our word for it, let this graph from our friends at

Old Mutual do the talking! Their Superfund investment update included this graph,

which illustrates a persistent rise in shares -

including after periods of decline influenced by macro-environment phenomena.

Since many investors focus on the long-term already, it is much less anxiety-inducing to look at this graph, and a lot easier to perceive how our funds may look in a few years despite a brief period of decline because of current factors. It is this that gives us hope when we see the upward slant signifying growth, that we once thought we never would after Covid-19 hit the world. When envisioning our financial future, we can include the facts: China is back at work out of lockdown, inflation is easing with interest rates expected to follow, and we can be at ease knowing that the market will follow its upward trend, slowly but surely.

For short-term investors, low returns may be seen as an opportunity for your financial adviser to diversify your portfolio, and spread risk across different asset classes. So, while low returns on investments may not seem like a positive in the short term, they can actually provide financial planners with the opportunity to plan and strategise more effectively for our clients.

It is also important to remember that the major contributions for your wealth actually come from you - you have 'sacrificed' your hardly earned money as savings to contribute to your wealth, and all we do is help you to grow that a percentage to be added to those savings. If you are seeing out this latest dip in the market, you should at least be proud of yourself for being invested in your financial future!

Ultimately, low investment returns do not necessarily signify a setback, and can be a sign of stability and growth. While it may not be as exciting as higher returns, monitoring the markets is the way we at Finpas ensure your long-term financial health. By carefully considering your investments and making sure your portfolio is diversified, we can ensure that you are making the most of your money and setting yourself up for a successful financial future.

Get in Touch or Make a Booking today if you want to take this journey with us!