Looking ahead to 2025: Why focusing on predictions is doomed to fail

Looking ahead to 2025: Why focusing on predictions is doomed to fail

Who would have thought that 2024 would turn out as it did? Despite the time and effort many put into making predictions (especially at this time of the year), events seldom turn out exactly as anticipated.

Locally, 2023 had been a year of record load shedding, and many did not expect us to avoid the spectre of a grid collapse during this past winter. Yet, at the end of December 2024, we surpassed 250 days without load shedding.

Looking back at the beginning of this year, the upcoming local election was a source of immense uncertainty and anxiety for many, and there were even predictions of possible public violence as we approached the voting date. While there was some talk of coalition governments, virtually no-one predicted a government of national unity. And, while it may not represent the ‘best possible’ scenario, it certainly side-stepped some of the worst-case outcomes. A better-than-anticipated election outcome and ever-so-slightly improved economic outlook helped boost the fortunes of the beleaguered rand, seeing the currency strengthen to below the R18 level, when many had anticipated an above R20/US$ exchange rate close to the end of the year. Who would have thought, at the beginning of 2024, that SA was on track to have its ratings outlook lifted to ‘positive’ by international ratings agencies before the end of what many had expected to be another bleak year?

The global environment delivered its fair share of surprises too. At the beginning of the year, the US presidential run-off was anticipated to be between Joe Biden and Donald Trump, and to yield closely contested election results. Instead, we saw a Republican sweep – a decisive and resounding victory in favour of the Republican Party, who now holds the Presidency, the Senate and the House of Representatives, and an ability to enforce changes in policy and legislation not seen in years.

Despite the time, effort and energy poured into our collective looking glasses at this time of the year, our ability to correctly predict outcomes – not only in politics but also in markets – remains poor (at least in the short run). This is why we remain firmly focused on following our bottom-up 3M investment process – even as markets, politics and geopolitics conspire to drive outcomes in unpredictable ways – and then considering our potential portfolio outcomes against a number of scenarios.

By patiently investing our time and energy in researching and identifying quality investment opportunities that the market is overlooking, we believe we are better positioned to deliver long-term value to our investors. Quality management teams have the ability to deliver results that defy expectations and drive shareholder value even in tough and unforgiving environments, especially where these markets are underpinned by fundamental drivers and constrained by real factors. When such investments can be found at deeply discounted levels, we see the potential to deliver exceptional long-term returns to patient investors. These opportunities often reside in unloved and uncrowded areas, and by seeing the potential in what many others are overlooking, we are able to deliver valuable diversification benefits to our clients as part of the investment journey.

Looking ahead to 2025, we don’t want to offer you predictions about what currencies, markets or asset classes will do in the coming year. Rather, we’d like to offer you the reassurance that there are always good investment opportunities to be found for patient investors. Moreover, we believe that in the long run, the odds of tilting the investment outcomes in our favour rise materially, and we are exceptionally well positioned to help our clients build their portfolios with this in mind.

We wish you a relaxing festive season, and all the best for a new year that we are sure will not turn out entirely as expected.

Anet Ahern is the Chief Executive Officer at PSG Asset Management.