Still battling to accept that 2024 will soon be a distant memory? Instead of having your annual meltdown about all you still need to accomplish this year, accept that it’s ending, look at what you’ve learned and go into 2025 with a kick-ass attitude.
By reflecting on what was, we can ensure that we take valuable lessons into 2025 – especially when it comes to our finances.
Perfect timing doesn’t exist
If the periodic market volatility of 2024 has taught us anything, it’s the importance of being patient – even if you’re anything but. When the market is down, trying to outsmart its ebbs and flows will never be an exact science. Emotions and investments are rarely an ideal combination. By timing the market and dropping out when things look ominous, we risk being out of play when things bounce back up. Rather, it’s about watching and waiting for those unexpected periods of high returns. Take a long-term view.
Inflation impact
Inflation refers to the cost of things. So how much can you buy with your money. Yes you know what we are talking about. If a bottle of vino cost you R100 last year it might be costing you R150 this year. Inflation moves up and down. In 2023 we saw the world’s inflation rise rapidly – this was the effect from the world’s worst Hangover post the COVID experience. With the US giving grants to American citizens to keep the economy afloat, well, people went out and spend. Thats exactly what the plan was, but with all that spending, prices increased and suddenly we started to experience inflation. The only way to curb this was to increase interest rates. Why? Because it would limit each individual’s monthly income stream. Picture it: If you have a house with a mortgage and interest rates go up, you have less disposable income to spend. As such you are less likely to go out shopping for shoes and handbags because you just have less money. The more interest rates increase, the less you are going to spend and this in turn starts to curb inflation. Slowly but surely, bring the price of goods down.
Where are we in 2024, well inflation has decreased so much that governments around the world are now starting to drop interest rates again. So now your mortgage on your house is slowly getting cheaper and cheaper. You have more money to spend. And so you may start shopping again.
But here’s the thing, we encourage you to think about this the Athena way…. You have already got used to paying that higher mortgage, so keep paying the same amount. Pay off ALL your debt as fast as possible, so that you have significantly more money to invest down the line and become financially free.
Political market impact
With elections in both South Africa and the United States in 2024, as well as continuing wars in Ukraine and the Middle East, markets were inevitably impacted. Yet their effect on your investments may not be as dramatic as you think. At Carrick Athena, we invest in giant cap companies which are not deeply affected by geographical events like wars. What does that mean? Well, we invest in companies that span the entire world, like VISA or Microsoft or Apple. These companies are less affected by singular geo-specific issues because their markets span the entire world. Which means the impact on your investments although still there, is very much diminished.
What about the US elections
Regardless of the US elections, the market is primed to fly in 2025. Why? Mainly due to the interest rates dropping in the US and around the world. As mentioned, people have more disposable income so they are buying things. E.g. Apple Computers. That means that Apple makes more profit. As an investor I am likely to look at Apple and think “goodness they are doing well, I think I will invest in Apple Shares” … and so (although this is a simple take on it), the market starts to move. Sitting in cash (yes ladies, that includes the cash stash you have under your pillow or in a simple bank account), is simply not the place to be invested at the moment.
So how does the USA influence this? Trump is likely to lower taxes. Again, this is going to mean more money in the market for companies to expand, and ultimately more money for the consumer to spend. For companies, it means they can streamline processes and make their companies work better and be more profitable. If we go back to the Apple computer example I mentioned earlier, this means more profits for the company and once again, as an investor I am likely to look at this and think of increasing my investment in Apple
Decreasing taxes does however mean that there might be more money available that what the central banks had anticipated, so we might find that interest rates decrease a little slower than anticipated.
Uncertainty and market sentiment
These will always be a factor of the market at any one time. However, the lesson one should take from this is: “Stick to your long-term goals, don’t overreact to noise in the market”
Our last lines of wisdom:
- If you are still saving for your future, then remember the rule of 50%(Needs)/ 30% (Wants)/ 20% (Future You) when looking at your budget.
- Have a plan – speak to a Carrick Athena Wealth Specialist who can help sketch out a Roadmap to financial freedom. This is a step by step “how to do it” guide.
- Save for you and your future but also remember to have a little fun!
