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So what can investors and market watchers expect in 2018? We take a brief look at the main topics sure to continue into 2018.
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What do we expect in 2018?
Well on the international front. A million new tweets from US president Donald Trump is not a bad bet. But on a serious note we suspect Bitcoin will rule the market related news in 2018. Is it a bubble, if so when will it burst. Will it reach $15 000 dollars or will it trade at $0.15 by the end of the year 2018? Well no one knows but sure is exciting watching the story unfold. We personally think that “crypto” currencies will be regulated by governments across the world in time as it is an easy way to launder cash. Once regulation kicks in prices will decline. We also expect loads of new “crypto” currencies to hit the market as people look to “get rich quick” with the craze and buzz around digital currencies. We also expect the Fed to raise interest rates as the US economy is showing signs of it being close to full employment which will push up inflation and provide the room for the Fed to raise interest rates. Outgoing Fed Chair Janet Yellen signaled that the Fed will look to raise rates 3 times in 2018, during a press conference on 13 December 2017, in which she also announced the Fed is raising interest rates. Thus ending off 2017 FOMC meetings with a interest rate hike.
In Europe, we expect the Brexit talks to continue to drag on as slowly as it has been in 2017. It has been painstakingly slow with neither of the parties involved in the negotiations really looking to give an inch. Currently a snail moves at a greater pace than the brexit negotiations. Sadly this will have an impact on expected growth for the region in 2018 and 2019, as the uncertaintly regarding all the negotiations will delay certain expenditure projects and expansion plans of various companies as they wait out the negotiations to see what exactly transpires and where they should be putting their money.
In Asia, Japan is expected to continue growing at a very modest pace, while the Asian giants China and India are expected to grow at extremely strong levels in 2018 and 2019 as continued urbanization takes place in these countries. We personally expect India's growth to outpace that of China in 2018. India is still far behind China in terms of development of their cities and as pace of development in India picks up so will growth. So our expectation is that in coming years India will be fueling global economic growth to the same extent that China has been doing over the last 20years.
On the local market front (South Africa), the South African Rand is set to remain as volatile as it has been during 2017, with politics, state capture, corruption and poor economic growth all having an impact on the performance of the Rand. A win for Cyril Ramaphosa at the ANC's elective conference would give markets hope that South Africa's future will not be more of the same (I.e. large scale corruption and stealing from State coffers).He is seen as pro business and markets will react positively to him winning the ANC president.
The South African Reserve Bank (SARB) has indicated in their latest Monetary Policy Committee (MPC) forecasts they their forecast up to 2019 is for interest rates to be 75basis points higher than it currently is. So South Africans can expect interest rate increases in 2018, with moderate to high levels of inflation and low to no economic growth to continue into 2018. South Africans can also expect higher taxes to be announced in the 2018 budget speech, while company tax rates are sure to increase too. Ideal would be for National Treasury to increase VAT too but this would be a highly unpopular move among the ruling party’s support base, so we doubt that will happen.
South Africa’s stock market is sure to be driven my Naspers (NPN), Richemont (CFR) and British American Tobacco (BTI). In addition to this we suspect the massive fall out at Steinhoff International (SNH) is sure to unravel as more details regarding the accounting irregularities become available. See interactive graph below for the massive share price declines experienced by Steinhoff and "related" companies of Steinhoff following the news of the accounting irregularities and the resignation of of former CEO Markus Jooste
In Europe, we expect the Brexit talks to continue to drag on as slowly as it has been in 2017. It has been painstakingly slow with neither of the parties involved in the negotiations really looking to give an inch. Currently a snail moves at a greater pace than the brexit negotiations. Sadly this will have an impact on expected growth for the region in 2018 and 2019, as the uncertaintly regarding all the negotiations will delay certain expenditure projects and expansion plans of various companies as they wait out the negotiations to see what exactly transpires and where they should be putting their money.
In Asia, Japan is expected to continue growing at a very modest pace, while the Asian giants China and India are expected to grow at extremely strong levels in 2018 and 2019 as continued urbanization takes place in these countries. We personally expect India's growth to outpace that of China in 2018. India is still far behind China in terms of development of their cities and as pace of development in India picks up so will growth. So our expectation is that in coming years India will be fueling global economic growth to the same extent that China has been doing over the last 20years.
On the local market front (South Africa), the South African Rand is set to remain as volatile as it has been during 2017, with politics, state capture, corruption and poor economic growth all having an impact on the performance of the Rand. A win for Cyril Ramaphosa at the ANC's elective conference would give markets hope that South Africa's future will not be more of the same (I.e. large scale corruption and stealing from State coffers).He is seen as pro business and markets will react positively to him winning the ANC president.
The South African Reserve Bank (SARB) has indicated in their latest Monetary Policy Committee (MPC) forecasts they their forecast up to 2019 is for interest rates to be 75basis points higher than it currently is. So South Africans can expect interest rate increases in 2018, with moderate to high levels of inflation and low to no economic growth to continue into 2018. South Africans can also expect higher taxes to be announced in the 2018 budget speech, while company tax rates are sure to increase too. Ideal would be for National Treasury to increase VAT too but this would be a highly unpopular move among the ruling party’s support base, so we doubt that will happen.
South Africa’s stock market is sure to be driven my Naspers (NPN), Richemont (CFR) and British American Tobacco (BTI). In addition to this we suspect the massive fall out at Steinhoff International (SNH) is sure to unravel as more details regarding the accounting irregularities become available. See interactive graph below for the massive share price declines experienced by Steinhoff and "related" companies of Steinhoff following the news of the accounting irregularities and the resignation of of former CEO Markus Jooste
The story that is transpiring at Steinhoff is sure to ask tough questions of not only internal auditors employed by companies but also those external auditors who have to sign off the financial statements. Just how do companies get away with the size of accounting irregularities as reported by Steinhoff in which there is a gaping hole of R96billion. How could both the external and internal auditors not pick it up. Or if they did pick it up why did they turn a blind eye or keep quiet?
Then on Bitcoin and crypto currencies, the graphic below shows the price history of Bitcoin (both in US dollars and South African Rand). A bit more detail regarding Bitcoin and it's returns are shown below the interactive graphic.
Then on Bitcoin and crypto currencies, the graphic below shows the price history of Bitcoin (both in US dollars and South African Rand). A bit more detail regarding Bitcoin and it's returns are shown below the interactive graphic.
For those not comfortable playing with the interactive chart above, the two images below shows the price movement in Bitcoin for the Year to Date and for the last 30days. And in both instances it is clear that it seems to be an uninterrupted price increase in Bitcoin. Such behaviour is extremely unhealthy and regular corrections are required in order to sustain long term price growth, as corrections weeds out speculators and chancers.
Year to Date
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Last month (30 days)
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Latest news in the Bitcoin world, is that Bitcoin futures will be launched soon, which will allow market participants to bet against the rapid price growth in Bitcoin, making market participants in Bitcoin weary that the big expected bursting of the Bitcoin bubble might be fast tracked with the introduction of these futures.
This article from Bloomberg below discusses the Bitcoin futures mentioned earlier:
A short snippet of the article:
"The intersection of digital money and traditional finance is at 400 South LaSalle Street in Chicago this weekend. That’s where trading in bitcoin futures opens Sunday evening, as the first major U.S. exchange offers a product pegged to the wildly fluctuating cryptocurrency.
The currency has risen more than 1,500 percent this year, and about 85 percent just in the past two weeks, driven largely by demand from individual investors. But even as bitcoin -- launched in 2009 as an alternative to banks -- divides Wall Street executives and central bankers worldwide, those kinds of gains are a powerful magnet."
Bloomberg Article
This article from Bloomberg below discusses the Bitcoin futures mentioned earlier:
A short snippet of the article:
"The intersection of digital money and traditional finance is at 400 South LaSalle Street in Chicago this weekend. That’s where trading in bitcoin futures opens Sunday evening, as the first major U.S. exchange offers a product pegged to the wildly fluctuating cryptocurrency.
The currency has risen more than 1,500 percent this year, and about 85 percent just in the past two weeks, driven largely by demand from individual investors. But even as bitcoin -- launched in 2009 as an alternative to banks -- divides Wall Street executives and central bankers worldwide, those kinds of gains are a powerful magnet."
Bloomberg Article
Performance of Bitcoin in Rands and US Dollars
The following section will take a look at the returns achieved by Bitcoin in both US Dollars and South African Rands over various time periods.
1month:
Rand Price per Bitcoin: 108%
US Dollar per Bitcoin: 115%
Year to date:
Rand Price per Bitcoin: 1 454%
US Dollar per Bitcoin: 1 457%
12months:
Rand Price per Bitcoin: 2 020%
US Dollar per Bitcoin: 1 994%
2 years:
Rand Price per Bitcoin: 3 518%
US Dollar per Bitcoin: 3 740%
5 years:
Rand Price per Bitcoin: 118 842%
US Dollar per Bitcoin: 187 116%
The above numbers clearly shows the extraordinary growth in the price of Bitcoin, even though it is not regarded as a means of exchange or a store of value in any large number of countries which makes us believe this is arguably the greatest asset bubble in history and when it pops it will be brutal and severe and a lot of people will lose all of their life savings as they keep jumping into it hoping to achieve the same kind of growth in future as Bitcoin has in the past.
1month:
Rand Price per Bitcoin: 108%
US Dollar per Bitcoin: 115%
Year to date:
Rand Price per Bitcoin: 1 454%
US Dollar per Bitcoin: 1 457%
12months:
Rand Price per Bitcoin: 2 020%
US Dollar per Bitcoin: 1 994%
2 years:
Rand Price per Bitcoin: 3 518%
US Dollar per Bitcoin: 3 740%
5 years:
Rand Price per Bitcoin: 118 842%
US Dollar per Bitcoin: 187 116%
The above numbers clearly shows the extraordinary growth in the price of Bitcoin, even though it is not regarded as a means of exchange or a store of value in any large number of countries which makes us believe this is arguably the greatest asset bubble in history and when it pops it will be brutal and severe and a lot of people will lose all of their life savings as they keep jumping into it hoping to achieve the same kind of growth in future as Bitcoin has in the past.
We do not advise readers to invest in the crypto currency frenzy as the likelihood of losing money increases every single day the price keeps rising, based on a limited store of value for Bitcoin, and not exactly a lot of places that it can be used as a means of paying for goods. India has for example warned numerous times that it does not recognize Bitcoin as a legal from of tender.
In addition to this the fact that the currency is not regulated makes governments nervous as it provides and easy way for individuals to launder illicit money. We therefore predict that governments across the world will soon step in to regulate it to some extent, Which will have a significant impact on the price of crypto currencies.
Another worry is the fact that the cost of "mining" Bitcoin is extremely expensive and the operating systems used to run these crypto currency mines draws enormous amounts of energy, so the question becomes is it a viable way of earning a living when the cost of running such Bitcoin mines might far outweigh the reward of mining it.
In addition to this the fact that the currency is not regulated makes governments nervous as it provides and easy way for individuals to launder illicit money. We therefore predict that governments across the world will soon step in to regulate it to some extent, Which will have a significant impact on the price of crypto currencies.
Another worry is the fact that the cost of "mining" Bitcoin is extremely expensive and the operating systems used to run these crypto currency mines draws enormous amounts of energy, so the question becomes is it a viable way of earning a living when the cost of running such Bitcoin mines might far outweigh the reward of mining it.
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