There is no doubt that the big theme of 2022 was global inflation. All eyes are now on what that might mean for year ahead but, as Chris illustrated, there is always a lot more to what happens in the markets than the headlines suggest.
An illustration of this was a look at the returns in the 10X Your Future Fund over the last three years, which most would agree have been very tough. Chris said: "Think about what’s happened … we have had 2020, so Covid pandemic. We have had the highest inflation effectively in 40 years globally and, despite everything, we have gone through over the last three years the 10X Your Future Fund has delivered 9.7% per annum."
During the webinar, Chris unpacked various factors that have put severe pressure on the markets around the globe in 2022. He outlined how South African investors had been shielded from the worst of the global pressure during the year despite the additional burden of loadshedding.
R100 invested at the beginning of 2022 in broad developed markets, as proxied by the by the MSCI World Index, would have sold off to R88 by year-end. In broader emerging markets, R100 would have sold off to R85. But, looking at South Africa, the JSE was positive for the year, delivering 4% returns, meaning R100 would have grown to R104.
Chris explained that this was largely thanks to two main factors:
1. Low starting valuations (as pointed out early last year As US hangover sets in, SA can be glad it missed the party), South African assets were not massively overpriced going into 2022, as they were in much of the developed world, and so the eventual reckoning in 2022 was much less severe for South Africa.
2. The South African economy is still commodity-heavy and 2022 saw elevated prices of commodities, certainly the commodities that make up our broad export basket. Chris explained how that positively impacts the economy in terms of bringing in hard currency earned on exports, which supports the exchange rate, as well as additional taxes gathered from a booming industry, which swells the coffers.
However, Chris added, even if commodities had underpinned rand strength in 2022, the mighty dollar was boosted by rising interest rates in the US during 2022. This meant that the rand depreciated against dollar by about 7%, although it was really resilient against the rest of the world.
15 years of industry-beating returns
Noting that, as of December 2022, 10X Investments has been managing money for clients for 15 years, Chris said this was an important milestone for the company that has delivered industry-beating returns from the start.
R100 invested with the average large manager in the Alexander Forbes Large Manager Watch in Dec 07 would have grown to R390 in December 2022. R100 in the 10X Your Future Fund since inception in December 2007 would have grown to R416, showing that 10X has consistently delivered above its peers.
Looking ahead
Chris also touched on what 2023 might hold. He said the markets were off to a very strong start both globally and locally, with the JSE up around 10% (at January 27).
From a broader economic perspective, Chris noted, there was a lot of concern about what higher interest rates would mean for global growth, but he added that from an investment and market point of view, expectations were a lot more promising than they were at this time last year.
Watch the full 2022 Investment Return presentation:
The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. 10X Investments is an authorised FSP (number 28250).
