Market Comment

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For months analysts and market commentators have warned that the local market is overvalued and that a correction may be on the cards. Since its peak the JSE All Share (ALSI) has pulled back by roughly 10% as can be seen below.  This view was reflected by most portfolio managers which were relatively conservatively positioned across portfolios.

JSE 

What caused the recent sell-off in markets? 

The South African market usually tracks the world leader, the US. If the US market corrects, the JSE tends to follow. The recent correction has been sparked by a severe correction in mining shares caused partly by a sharp dollar rally.  The US dollar rallying has contributed in a big way to push down the prices of a range of commodities including oil, iron ore, copper, platinum, gold and palladium.  The situation has been aggravated by reports of weaker economic growth in China and Europe and commodity prices have taken a beating.

The poor economic data coming out of Germany and the possibility that Europe could go back into recession have added to the market’s woes.  The big question now is whether the European Central Bank has enough firing power to resolve such a situation, especially given that Germany is slowing down as well.

We believe that in times like these, investors should stick to their investment strategy and not make emotional decisions that will influence the outcome of their investments.

This belief is further entrenched by the fact the FPM Model Portfolios continue to protect investors relative to the large equity market correction. We have included the drawdown’s over the last month to illustrate this point.

15/09/2014 to 15/10/2014

FPM Income Fund 0.50%
FPM Conservative Fund -1.96%
FPM Moderate Fund -2.80%
FPM Moderate Growth Fund -4.22%
FPM Flexible Fund -6.08%
FTSE/JSE Allshare Index -9.63%

Longer-term numbers continue to look good on an absolute basis as well as relative to benchmark as detailed below: 

FPM Model Solution

3 years

4 years

5 years

FPM INCOME

5.86

5.98

 6.61

CPI

 5.92

 5.80

 5.33

FPM CONSERVATIVE

11.38

10.58

 10.74

CPI + 3%

 8.93

 8.80

 8.34

FPM MODERATE

13.12

11.72

 11.89

CPI + 4%

 9.93

 9.80

 9.34

FPM MODERATE GROWTH

15.94

13.61

 13.68

CPI + 5%

 10.93

 10.80

 10.34

FPM FLEXIBLE

21.54

17.81

 17.00

CPI + 6%

 11.93

 11.80

 11.34

We hope this information provides you with the comfort that your investment assets are being managed with all the care and due diligence they deserve. If you would like additional information or to chat to one of us please do not hesitate to give us a call on 011 778 9300.

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