PERHAPS after reading this most recent submission to SSL’s ‘In the Money’, one may be inclined to wonder whether the imagination of this writer was impacted by any of the events of the Cinco de Mayo weekend. It is a privilege to be able to say, the creativity of the subject matter was in no way attributable to anything other than acute awareness of the signs of the times and the likely implications that they may bear on future outcomes!

As previously established in past contributions to this newspaper and other publications, the belief is that the passage of time should cause investment principals to grow; the comparison to an investment principal as a seed, and the end result being the growth of a tree from which one bears fruit for an extended period fits this scenario well.

Digression notwithstanding, it is with this in mind that I ask you to consider the year 2018 and the appearance of the Jamaican and by extension, the global investment landscape. Having given it some thought over the weekend, the following thoughts surfaced, and what a pleasure it is to share them with you.

For starters, the United Kingdom would have gone to the polls in 2015 to elect a Prime Minister and if current PM David Cameron got his way, and indeed won in 2015, there would be a 2017 in-out referendum to renegotiate Britain’s European Union (EU) membership. Now, if the 2013 sentiment of those polled held where only one of three Brits polled were in favour of remaining a member of the EU, Britain would have indeed exited. Now, this is not altogether surprising, in light of what has transpired recently, but would it be far-fetched to expect another two countries to leave the bloc in light of the financial struggles? Perhaps not.

Further, moving stateside and considering that the ceasing of QE3 (the third round of Quantitative Easing — the bond buyback programme of the US Federal Reserve aimed at lowering interest rates) is already being contemplated by some members of ‘The Fed’ (Charles Plosser- Federal Reserve Bank of Philadelphia President is one such person) it is a safe bet that this will indeed manifest itself by 2015. It also follows that the low interest rate programme pursued by ‘The Fed’ since 2008 will be ceased and the overall result will be higher interest rates in the USA. Some may argue that we may not have to wait until 2018 for this to happen.

Moving onto Jamaican waters, in addition to the completion of heralded projects such as the Harmony Cove development and the hotly anticipated logistics hubs, the drawdown of funds from the International Monetary Fund (IMF) would be long-completed and the repayment would begin in earnest. Speaking of repayments, according to the post National Debt Exchange (NDX) maturity schedule, the year 2018 is sandwiched between maturity payments of $131 billion in 2017, $129 billion in 2019 and $170 billion in 2020.In this post-NDX environment, where companies have to rely on core business for returns solely and can no longer bank on (pardon the pun) investment income in the pre-JDX environment, there could be those who find the going tough and become parts of larger conglomerates. It is quite reasonable to expect several mergers and acquisitions to have occurred by this time.

The alteration of the Pension Act (2004) to allow local pension funds to hold more than the current five per cent limit on foreign assets in their portfolios is also likely to have been passed (one would hope), and as such, the landscape and the assets/areas to which funds are deployed is likely to bear minimal resemblance to that of the present day. The Jamaica Stock Exchange (JSE) exchange could possibly pass the milestone of 100 listed companies, and it is likely that some of these companies would attract the attention of the pension funds spoken of. This likelihood increases significantly if more REITs (Real Estate Investment Trusts) were to find their way on the JSE.

Also worth noting is the transitioning of several business luminaries which brought the publicly traded companies onto the JSE and the slew of second generation leadership. The JSE Junior Market, in continuing its transition to adulthood, would see the first set of companies to list (up to 2013 May) now paying their 50 per cent of corporate taxes.

Having outlined the following scenarios, one may indeed be led to question the moral of the story, and the necessity of this information/prediction. Well, in short, and referring to the illustration drawn between the seed/investment principal and the tree/bearing fruit, the actions of the present day bear great weight on the future. In other words, it is only with an eye towards the future — and of course, an assumption — that one can adequately determine the quality of the soil being sown.

In conclusion, here are five questions. If what has been stated does manifest, can your investment portfolio withstand such an outcome? If the head of the company you’ve invested in were to transition tomorrow, is the succession planning sufficient to allow them to maintain its standard of performance? Is your portfolio sufficiently diversified to sustain itself in light of a changing in interest rates in the USA as predicted? The companies themselves should be diversified with earnings coming from multiple regions and product lines. Further, does the JSE Junior Market companies in which you’ve invested earn sufficient returns from core business to sustain itself when they eventually have to pay corporate taxes? Does your company have the strength of cash to take advantage of an acquisition opportunity which is likely to have surfaced in the 5-year post-recession recovery period?

Strategic decisions are necessary in this year 2013.

Ryan Strachan is the Manager, Wealth Advisor at Stocks & Securities Limited and may be contacted via rstrachan@sslinvest.com