In May the average prudential balanced portfolio returned 0.21% (April: 1.95%). Top performer is Momentum (0.79%); while Prudential (-0.24%) takes the bottom spot. For the 3 month period, Momentum takes top spot, outperforming the ‘average’ by roughly 1.0%. On the other end of the scale Investment Solutions underperformed the ‘average’ by 0.8%.

“The everything bubble” – so where do you invest?

Further down this newsletter contains an interesting and somehow frightening article titled ‘the everything bubble’ making the point that just about every asset class in the world today represents a bubble, i.e. it is significantly overprized. This conclusion is corroborated by another article in same newsletter titled ‘Median p: e and forward 10 year returns’ specifically with reference to the US equity market. This article suggests that median returns on equities for the next 10 years are likely to be only around 4.3% per annum only based on the current median p: e ratio of the US S&P 500 of 24 being in the 5th quintile, the highest quintile of historic mean p: e’s.

In the Benchmark Monthly Performance Review of 28 February 2017 we presented graphs on the JSE Allshare index and its p: e, currently on 19.3 which is similarly way above its 30 year average of between 13 and 15. SA equities are thus also in ‘bubble territory’.