Figure 2
company earnings and asset class
returns. Ultimately the environment
is still one that encourages
economic growth.”
of these four scenarios. The below
chart illustrates the historical
annualised returns in different
cycles: (See: Figure 2)
If the Reserve Bank is also only
increasing at 25 basis points at a
time, it is also going to take a long
time to get to that level.”
The cycle in which we currently find
ourselves – low, but rising rates has
shown average annualised returns
of 13%. If one factors in current
inflation of 6%, that would be a
real return of 7%, which is in line
with average long term returns on
the JSE.
PSG Wealth conducted an historical
analysis that looked at how equity
markets have performed in each
46
ISSUE 6 – SEPTEMBER 2015
“The current interest phase is
definitely not the worst phase
for equities and investors
should not start selling equities
indiscriminately,” Pask argues.
“The extent to which investors
reduce exposure to equities
should rather be in accordance
with their risk profile and
investment objectives.” ■