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What Investment Opportunities Lie Ahead in 2017
Sunday 29, January 2017

What Investment Opportunities Lie Ahead in 2017

pam

The past year has been fraught with uncertainty and the accompanying, ever-present volatility both in the bond market and the equities market.  As many investors know, uncertainty and volatility (also known as risk) are a speculator’s best friends.  Savvy, active investors love volatility … that’s how some big bucks are made!!

 

However, volatility is not for everyone.  This is more a game for the speculative; and the risks are usually grave (pun intended).  A speculative investor has to condition himself to making losses … and so, he will risk only those funds he can afford to lose.

 

Locally, stocks have fared well in the last two years.  So much so that by the end of 2015 we were presented with the news through Bloomberg that the performance of the Jamaica Stock Exchange (JSE) had earned it the position of the No.1 stock exchange in the world!!!  During 2015 the Jamaican stock market advanced by over 90% … note that this was in just that one year!!!  That was a spectacular performance.  Not even the markets in the great United States could have mustered up such a performance.  Kudos to the JSE team!  The excellence continued into 2016 and even though the JSE did not quite measure up to defending its No.1 position for that year, it still returned over 20% for the year.  During 2016 the Main JSE Index traded at a low of just over 150,000 (in the month of May) but quickly recovered to end the year at a record high of just over 190,000.  So far in 2017, the Main JSE Index has traded at a record high of 195,414 but has since given up some of its gains, trading at 195,406 as at today’s date (January 16, 2017).

 

That said, stocks (particularly US stocks, European stocks; and sectors such as banking/finance and housing) may just be the big money-earner for 2017 as the year progresses into the Trump administration (read: lots of volatility!).  It appears that the housing sector is being plugged to do well under the new Trump administration(notwithstanding the charge he reinstated on home owners).  As such, it appears that many investors are racing to get their hands on anything housing:  physical real estate, stocks, REITs, bonds … the works.  The banking and finance sectors (both stocks and bonds) have been performing well over the past two years, giving investors some good returns on their investments.  Oil also performed well over the past year, as prices slowly recovered from below $50 per barrel.

 

Bonds have the peculiar ability to also stave off some of the adverse effects of the political decision-making process (over time) and represent some of the most resilient investments for both individual and corporate clients.  Bond markets normally settle down after periods of volatility, making them excellent medium- to long-term investments.  Couple that with the regular coupons (interest) being paid by the issuers and you get a more stable investment.  Investors who require regular, steady income are more comfortable with bonds.

 

Notwithstanding the sentiments above regarding speculative investors, the cautious investor can also make good returns on his investments.  Bonds provide this ability/opportunity for the cautious investor as the risks associated with bonds are much lower than those of equities (technically).  An investor in bonds, who is investing for the medium- to long-term, can generally be assured of his coupons (and in many cases, a capital gain, when he decides to sell his bonds).   

 

The bottom line is that investors should stay with the banking/financial sector; complete that with some housing bonds/stocks.  Keep an eye on oil (but remember oil is purely speculative at the moment – and extremely volatile).  And as always, seek the advice of a trusted, knowledgeable Financial Advisor.

 

Pamela Lewis is Vice President, Investments and Client Services at Sterling Asset Management Ltd. Sterling provides financial and advisory services to the corporate, individual and institutional investor. Feedback:  If you wish to have Sterling address your investment questions in upcoming articles, please e-mail us at: info@sterlingasset.net.jm or visit our website at www.sterling.com.jm

 

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